Correlation Between Infosys and China Communications

Can any of the company-specific risk be diversified away by investing in both Infosys and China Communications 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 China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infosys Limited and China Communications Services, you can compare the effects of market volatilities on Infosys and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and China Communications.

Diversification Opportunities for Infosys and China Communications

-0.64

Correlation Coefficient

Infosys  China Communications

Excellent diversification

The 3 months correlation between Infosys and China is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 Limited are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Infosys i.e., Infosys and China Communications go up and down completely randomly.

Pair Corralation between Infosys and China Communications

Assuming the 90 days horizon Infosys Limited is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Limited is 1.68 times less risky than China Communications. The stock trades about -0.11 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  45.00  in China Communications Services on May 20, 2025 and sell it today you would earn a total of  7.00  from holding China Communications Services or generate 15.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Infosys Limited  vs.  China Communications Services

Infosys Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days Infosys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

China Communications

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and China Communications

The main advantage of trading using opposite Infosys and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.

The idea behind Infosys Limited and China Communications Services 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.