Correlation Between Infosys and Wipro Limited

Can any of the company-specific risk be diversified away by investing in both Infosys and Wipro Limited at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Infosys and Wipro Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infosys Ltd ADR and Wipro Limited ADR, you can compare the effects of market volatilities on Infosys and Wipro Limited and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Infosys with a short position of Wipro Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and Wipro Limited.

Diversification Opportunities for Infosys and Wipro Limited

0.95

Correlation Coefficient

Infosys  Wipro Limited

Almost no diversification

The 3 months correlation between Infosys and Wipro is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Wipro Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited ADR and Infosys is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Infosys Ltd ADR are associated (or correlated) with Wipro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited ADR has no effect on the direction of Infosys i.e., Infosys and Wipro Limited go up and down completely randomly.

Pair Corralation between Infosys and Wipro Limited

Given the investment horizon of 90 days Infosys Ltd ADR is expected to generate 1.05 times more return on investment than Wipro Limited. However, Infosys is 1.05 times more volatile than Wipro Limited ADR. It trades about -0.29 of its potential returns per unit of risk. Wipro Limited ADR is currently generating about -0.34 per unit of risk. If you would invest  2,121  in Infosys Ltd ADR on January 20, 2025 and sell it today you would lose (507.00) from holding Infosys Ltd ADR or give up 23.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Infosys Ltd ADR  vs.  Wipro Limited ADR

Infosys Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Wipro Limited ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wipro Limited ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Infosys and Wipro Limited

The main advantage of trading using opposite Infosys and Wipro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, Wipro Limited can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wipro Limited will offset losses from the drop in Wipro Limited's long position.

The idea behind Infosys Ltd ADR and Wipro Limited ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.