Correlation Between ICICI Bank and Union Bank

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

Diversification Opportunities for ICICI Bank and Union Bank

0.73

Correlation Coefficient

ICICI Bank  Union Bank

Poor diversification

The 3 months correlation between ICICI and Union is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of ICICI Bank i.e., ICICI Bank and Union Bank go up and down completely randomly.

Pair Corralation between ICICI Bank and Union Bank

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.8 times more return on investment than Union Bank. However, ICICI Bank Limited is 1.25 times less risky than Union Bank. It trades about 0.07 of its potential returns per unit of risk. Union Bank of is currently generating about 0.05 per unit of risk. If you would invest  126,390  in ICICI Bank Limited on September 14, 2024 and sell it today you would earn a total of  6,535  from holding ICICI Bank Limited or generate 5.17% 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.  Union Bank of

ICICI Bank Limited

Risk-Adjusted Performance

5 of 100

Modest

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Union Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICICI Bank and Union Bank

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

The idea behind ICICI Bank Limited and Union Bank of 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.