Correlation Between ICICI Bank and DiGiSPICE Technologies

Can any of the company-specific risk be diversified away by investing in both ICICI Bank and DiGiSPICE 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 DiGiSPICE 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 DiGiSPICE Technologies Limited, you can compare the effects of market volatilities on ICICI Bank and DiGiSPICE 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 DiGiSPICE Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and DiGiSPICE Technologies.

Diversification Opportunities for ICICI Bank and DiGiSPICE Technologies

-0.33

Correlation Coefficient

ICICI Bank  DiGiSPICE Technologies

Very good diversification

The 3 months correlation between ICICI and DiGiSPICE is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and DiGiSPICE Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiGiSPICE Technologies 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 DiGiSPICE Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiGiSPICE Technologies has no effect on the direction of ICICI Bank i.e., ICICI Bank and DiGiSPICE Technologies go up and down completely randomly.

Pair Corralation between ICICI Bank and DiGiSPICE Technologies

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.54 times more return on investment than DiGiSPICE Technologies. However, ICICI Bank Limited is 1.85 times less risky than DiGiSPICE Technologies. It trades about 0.07 of its potential returns per unit of risk. DiGiSPICE Technologies Limited is currently generating about -0.17 per unit of risk. If you would invest  122,905  in ICICI Bank Limited on August 31, 2024 and sell it today you would earn a total of  7,105  from holding ICICI Bank Limited or generate 5.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ICICI Bank Limited  vs.  DiGiSPICE Technologies Limited

ICICI Bank Limited

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ICICI Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

DiGiSPICE Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DiGiSPICE Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ICICI Bank and DiGiSPICE Technologies

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

The idea behind ICICI Bank Limited and DiGiSPICE Technologies Limited 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.