Correlation Between Transport and ICICI Bank

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

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

Diversification Opportunities for Transport and ICICI Bank

0.53

Correlation Coefficient

Transport  ICICI Bank

Very weak diversification

The 3 months correlation between Transport and ICICI is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited and Transport 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 Transport of are associated (or correlated) with ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of Transport i.e., Transport and ICICI Bank go up and down completely randomly.

Pair Corralation between Transport and ICICI Bank

Assuming the 90 days trading horizon Transport of is expected to generate 2.49 times more return on investment than ICICI Bank. However, Transport is 2.49 times more volatile than ICICI Bank Limited. It trades about 0.08 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.1 per unit of risk. If you would invest  103,909  in Transport of on September 20, 2024 and sell it today you would earn a total of  8,526  from holding Transport of or generate 8.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Transport of  vs.  ICICI Bank Limited

Transport

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Transport is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Transport and ICICI Bank

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

The idea behind Transport of and ICICI Bank 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.