Correlation Between Citizens Financial and ICICI Bank

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

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

Diversification Opportunities for Citizens Financial and ICICI Bank

0.81

Correlation Coefficient

Citizens Financial  ICICI Bank

Very poor diversification

The 3 months correlation between Citizens and ICICI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, 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 Citizens Financial 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 Citizens Financial Group, 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 Citizens Financial i.e., Citizens Financial and ICICI Bank go up and down completely randomly.

Pair Corralation between Citizens Financial and ICICI Bank

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 1.75 times more return on investment than ICICI Bank. However, Citizens Financial is 1.75 times more volatile than ICICI Bank Limited. It trades about 0.13 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.22 per unit of risk. If you would invest  22,663  in Citizens Financial Group, on October 8, 2024 and sell it today you would earn a total of  4,308  from holding Citizens Financial Group, or generate 19.01% return on investment over 90 days.

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

Citizens Financial Group,  vs.  ICICI Bank Limited

Citizens Financial Group,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

ICICI Bank Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, ICICI Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and ICICI Bank

The main advantage of trading using opposite Citizens Financial and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial 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 Citizens Financial Group, 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.