Correlation Between ICICI Bank and Zomato

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

Diversification Opportunities for ICICI Bank and Zomato

0.44

Correlation Coefficient

ICICI Bank  Zomato

Very weak diversification

The 3 months correlation between ICICI and Zomato is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato 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 Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of ICICI Bank i.e., ICICI Bank and Zomato go up and down completely randomly.

Pair Corralation between ICICI Bank and Zomato

Assuming the 90 days trading horizon ICICI Bank is expected to generate 2.25 times less return on investment than Zomato. But when comparing it to its historical volatility, ICICI Bank Limited is 2.03 times less risky than Zomato. It trades about 0.12 of its potential returns per unit of risk. Zomato Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  26,681  in Zomato Limited on September 22, 2024 and sell it today you would earn a total of  1,529  from holding Zomato Limited or generate 5.73% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Zomato Limited

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

Zomato Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zomato 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 Zomato

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

The idea behind ICICI Bank Limited and Zomato 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.