Correlation Between ICICI Bank and Larsen Toubro

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both ICICI Bank and Larsen Toubro 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 Larsen Toubro 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 Larsen Toubro Limited, you can compare the effects of market volatilities on ICICI Bank and Larsen Toubro 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 Larsen Toubro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and Larsen Toubro.

Diversification Opportunities for ICICI Bank and Larsen Toubro

ICICILarsenDiversified AwayICICILarsenDiversified Away100%
0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between ICICI and Larsen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Larsen Toubro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larsen Toubro Limited 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 Larsen Toubro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larsen Toubro Limited has no effect on the direction of ICICI Bank i.e., ICICI Bank and Larsen Toubro go up and down completely randomly.

Pair Corralation between ICICI Bank and Larsen Toubro

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.7 times more return on investment than Larsen Toubro. However, ICICI Bank Limited is 1.42 times less risky than Larsen Toubro. It trades about 0.04 of its potential returns per unit of risk. Larsen Toubro Limited is currently generating about -0.01 per unit of risk. If you would invest  127,395  in ICICI Bank Limited on September 29, 2024 and sell it today you would earn a total of  3,360  from holding ICICI Bank Limited or generate 2.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.39%
ValuesDaily Returns

ICICI Bank Limited  vs.  Larsen Toubro Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15ICICIBANK LT
       Timeline  
ICICI Bank Limited 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1,2201,2401,2601,2801,3001,3201,3401,360
Larsen Toubro Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Larsen Toubro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Larsen Toubro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3,3003,4003,5003,6003,7003,8003,900

ICICI Bank and Larsen Toubro Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.86-1.39-0.92-0.45-0.01560.410.881.351.822.29 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15ICICIBANK LT
       Returns  

Pair Trading with ICICI Bank and Larsen Toubro

The main advantage of trading using opposite ICICI Bank and Larsen Toubro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, Larsen Toubro 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 Larsen Toubro will offset losses from the drop in Larsen Toubro's long position.
The idea behind ICICI Bank Limited and Larsen Toubro 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.
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

Other Complementary Tools

Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Fundamental Analysis
View fundamental data based on most recent published financial statements
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device