Correlation Between ICICI Bank and Adobe

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

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

Diversification Opportunities for ICICI Bank and Adobe

0.22

Correlation Coefficient

ICICI Bank  Adobe

Modest diversification

The 3 months correlation between ICICI and Adobe is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and ICICI Bank 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 ICICI Bank Limited are associated (or correlated) with Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of ICICI Bank i.e., ICICI Bank and Adobe go up and down completely randomly.

Pair Corralation between ICICI Bank and Adobe

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the Adobe. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 1.19 times less risky than Adobe. The stock trades about -0.41 of its potential returns per unit of risk. The Adobe Inc is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  5,625  in Adobe Inc on October 23, 2024 and sell it today you would lose (472.00) from holding Adobe Inc or give up 8.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

ICICI Bank Limited  vs.  Adobe Inc

ICICI Bank Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, ICICI Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ICICI Bank and Adobe

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

The idea behind ICICI Bank Limited and Adobe Inc 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.