Correlation Between Apollo Hospitals and ICICI Securities

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

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

Diversification Opportunities for Apollo Hospitals and ICICI Securities

0.3

Correlation Coefficient

Apollo Hospitals  ICICI Securities

Weak diversification

The 3 months correlation between Apollo and ICICI is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Hospitals Enterprise and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and Apollo Hospitals 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 Apollo Hospitals Enterprise are associated (or correlated) with ICICI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Securities has no effect on the direction of Apollo Hospitals i.e., Apollo Hospitals and ICICI Securities go up and down completely randomly.

Pair Corralation between Apollo Hospitals and ICICI Securities

Assuming the 90 days trading horizon Apollo Hospitals Enterprise is expected to generate 1.43 times more return on investment than ICICI Securities. However, Apollo Hospitals is 1.43 times more volatile than ICICI Securities Limited. It trades about -0.02 of its potential returns per unit of risk. ICICI Securities Limited is currently generating about -0.06 per unit of risk. If you would invest  698,640  in Apollo Hospitals Enterprise on October 21, 2024 and sell it today you would lose (15,830) from holding Apollo Hospitals Enterprise or give up 2.27% of portfolio value over 90 days.

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

Apollo Hospitals Enterprise  vs.  ICICI Securities Limited

Apollo Hospitals Ent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Hospitals Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Apollo Hospitals is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

ICICI Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Securities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ICICI Securities 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 Apollo Hospitals and ICICI Securities

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

The idea behind Apollo Hospitals Enterprise and ICICI Securities 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.