Correlation Between ICICI Bank and Naga Dhunseri

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

Diversification Opportunities for ICICI Bank and Naga Dhunseri

-0.31

Correlation Coefficient

ICICI Bank  Naga Dhunseri

Very good diversification

The 3 months correlation between ICICI and Naga is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Naga Dhunseri Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naga Dhunseri Group 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 Naga Dhunseri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naga Dhunseri Group has no effect on the direction of ICICI Bank i.e., ICICI Bank and Naga Dhunseri go up and down completely randomly.

Pair Corralation between ICICI Bank and Naga Dhunseri

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the Naga Dhunseri. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 3.27 times less risky than Naga Dhunseri. The stock trades about 0.0 of its potential returns per unit of risk. The Naga Dhunseri Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  389,530  in Naga Dhunseri Group on September 27, 2024 and sell it today you would earn a total of  84,515  from holding Naga Dhunseri Group or generate 21.7% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Naga Dhunseri Group

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.

Naga Dhunseri Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naga Dhunseri Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Naga Dhunseri unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and Naga Dhunseri

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

The idea behind ICICI Bank Limited and Naga Dhunseri Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.