Correlation Between ICICI Lombard and Dhampur Bio

Can any of the company-specific risk be diversified away by investing in both ICICI Lombard and Dhampur Bio 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 Lombard and Dhampur Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICICI Lombard General and Dhampur Bio Organics, you can compare the effects of market volatilities on ICICI Lombard and Dhampur Bio 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 Lombard with a short position of Dhampur Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Lombard and Dhampur Bio.

Diversification Opportunities for ICICI Lombard and Dhampur Bio

0.74

Correlation Coefficient

ICICI Lombard  Dhampur Bio

Poor diversification

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

Pair Corralation between ICICI Lombard and Dhampur Bio

Assuming the 90 days trading horizon ICICI Lombard General is expected to under-perform the Dhampur Bio. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Lombard General is 2.14 times less risky than Dhampur Bio. The stock trades about -0.09 of its potential returns per unit of risk. The Dhampur Bio Organics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,165  in Dhampur Bio Organics on September 13, 2024 and sell it today you would lose (203.00) from holding Dhampur Bio Organics or give up 1.54% of portfolio value over 90 days.

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

ICICI Lombard General  vs.  Dhampur Bio Organics

ICICI Lombard General

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Lombard General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Dhampur Bio Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhampur Bio Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dhampur Bio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ICICI Lombard and Dhampur Bio

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

The idea behind ICICI Lombard General and Dhampur Bio Organics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.