Correlation Between ICICI Bank and AVALON TECHNOLOGIES

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

By analyzing existing cross correlation between ICICI Bank Limited and AVALON TECHNOLOGIES LTD, you can compare the effects of market volatilities on ICICI Bank and AVALON TECHNOLOGIES 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 ICICI Bank with a short position of AVALON TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and AVALON TECHNOLOGIES.

Diversification Opportunities for ICICI Bank and AVALON TECHNOLOGIES

0.39

Correlation Coefficient

ICICI Bank  AVALON TECHNOLOGIES

Weak diversification

The 3 months correlation between ICICI and AVALON is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD and ICICI Bank 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 ICICI Bank Limited are associated (or correlated) with AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of ICICI Bank i.e., ICICI Bank and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between ICICI Bank and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the AVALON TECHNOLOGIES. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 3.98 times less risky than AVALON TECHNOLOGIES. The stock trades about -0.03 of its potential returns per unit of risk. The AVALON TECHNOLOGIES LTD is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  90,590  in AVALON TECHNOLOGIES LTD on September 27, 2024 and sell it today you would earn a total of  4,270  from holding AVALON TECHNOLOGIES LTD or generate 4.71% return on investment over 90 days.

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

ICICI Bank Limited  vs.  AVALON TECHNOLOGIES LTD

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ICICI Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and AVALON TECHNOLOGIES

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

The idea behind ICICI Bank Limited and AVALON TECHNOLOGIES LTD 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.