Correlation Between HDFC Asset and ICICI Securities

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

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

Diversification Opportunities for HDFC Asset and ICICI Securities

0.78

Correlation Coefficient

HDFC Asset  ICICI Securities

Poor diversification

The 3 months correlation between HDFC and ICICI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and HDFC Asset 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 HDFC Asset Management 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 HDFC Asset i.e., HDFC Asset and ICICI Securities go up and down completely randomly.

Pair Corralation between HDFC Asset and ICICI Securities

Assuming the 90 days trading horizon HDFC Asset Management is expected to under-perform the ICICI Securities. In addition to that, HDFC Asset is 1.73 times more volatile than ICICI Securities Limited. It trades about -0.11 of its total potential returns per unit of risk. ICICI Securities Limited is currently generating about -0.11 per unit of volatility. If you would invest  87,265  in ICICI Securities Limited on November 29, 2024 and sell it today you would lose (6,020) from holding ICICI Securities Limited or give up 6.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

HDFC Asset Management  vs.  ICICI Securities Limited

HDFC Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ICICI Securities

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with HDFC Asset and ICICI Securities

The main advantage of trading using opposite HDFC Asset and ICICI Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Asset 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 HDFC Asset Management 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.