Correlation Between Fairchem Organics and ICICI Lombard

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

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

Diversification Opportunities for Fairchem Organics and ICICI Lombard

0.02

Correlation Coefficient

Fairchem Organics  ICICI Lombard

Significant diversification

The 3 months correlation between Fairchem and ICICI is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fairchem Organics Limited and ICICI Lombard General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Lombard General and Fairchem Organics 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 Fairchem Organics Limited are associated (or correlated) with ICICI Lombard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Lombard General has no effect on the direction of Fairchem Organics i.e., Fairchem Organics and ICICI Lombard go up and down completely randomly.

Pair Corralation between Fairchem Organics and ICICI Lombard

Assuming the 90 days trading horizon Fairchem Organics Limited is expected to under-perform the ICICI Lombard. In addition to that, Fairchem Organics is 2.49 times more volatile than ICICI Lombard General. It trades about -0.17 of its total potential returns per unit of risk. ICICI Lombard General is currently generating about 0.07 per unit of volatility. If you would invest  186,205  in ICICI Lombard General on October 24, 2024 and sell it today you would earn a total of  4,045  from holding ICICI Lombard General or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Fairchem Organics Limited  vs.  ICICI Lombard General

Fairchem Organics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fairchem Organics Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Fairchem Organics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fairly strong forward indicators, ICICI Lombard is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fairchem Organics and ICICI Lombard

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

The idea behind Fairchem Organics Limited and ICICI Lombard General 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.