Correlation Between ICICI Bank and Max Healthcare

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

Diversification Opportunities for ICICI Bank and Max Healthcare

0.74

Correlation Coefficient

ICICI Bank  Max Healthcare

Poor diversification

The 3 months correlation between ICICI and Max is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Max Healthcare Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Healthcare Institute 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 Max Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Healthcare Institute has no effect on the direction of ICICI Bank i.e., ICICI Bank and Max Healthcare go up and down completely randomly.

Pair Corralation between ICICI Bank and Max Healthcare

Assuming the 90 days trading horizon ICICI Bank is expected to generate 3.51 times less return on investment than Max Healthcare. But when comparing it to its historical volatility, ICICI Bank Limited is 1.75 times less risky than Max Healthcare. It trades about 0.08 of its potential returns per unit of risk. Max Healthcare Institute is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  90,800  in Max Healthcare Institute on September 13, 2024 and sell it today you would earn a total of  22,420  from holding Max Healthcare Institute or generate 24.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

ICICI Bank Limited  vs.  Max Healthcare Institute

ICICI Bank Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, ICICI Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Max Healthcare Institute

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Max Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and Max Healthcare

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

The idea behind ICICI Bank Limited and Max Healthcare Institute 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.