Correlation Between GM Breweries and ICICI Securities

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

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

Diversification Opportunities for GM Breweries and ICICI Securities

0.4

Correlation Coefficient

GM Breweries  ICICI Securities

Very weak diversification

The 3 months correlation between GMBREW and ICICI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and GM Breweries 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 GM Breweries Limited 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 GM Breweries i.e., GM Breweries and ICICI Securities go up and down completely randomly.

Pair Corralation between GM Breweries and ICICI Securities

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the ICICI Securities. In addition to that, GM Breweries is 2.27 times more volatile than ICICI Securities Limited. It trades about -0.14 of its total potential returns per unit of risk. ICICI Securities Limited is currently generating about 0.08 per unit of volatility. If you would invest  84,855  in ICICI Securities Limited on December 25, 2024 and sell it today you would earn a total of  4,765  from holding ICICI Securities Limited or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

GM Breweries Limited  vs.  ICICI Securities Limited

GM Breweries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ICICI Securities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Securities Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ICICI Securities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM Breweries and ICICI Securities

The main advantage of trading using opposite GM Breweries and ICICI Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM Breweries 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 GM Breweries Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.