Correlation Between ICICI Bank and DTCOM Direct

Can any of the company-specific risk be diversified away by investing in both ICICI Bank and DTCOM Direct 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 DTCOM Direct 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 DTCOM Direct, you can compare the effects of market volatilities on ICICI Bank and DTCOM Direct 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 DTCOM Direct. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and DTCOM Direct.

Diversification Opportunities for ICICI Bank and DTCOM Direct

0.32

Correlation Coefficient

ICICI Bank  DTCOM Direct

Weak diversification

The 3 months correlation between ICICI and DTCOM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and DTCOM Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTCOM Direct 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 DTCOM Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTCOM Direct has no effect on the direction of ICICI Bank i.e., ICICI Bank and DTCOM Direct go up and down completely randomly.

Pair Corralation between ICICI Bank and DTCOM Direct

Assuming the 90 days trading horizon ICICI Bank is expected to generate 47.82 times less return on investment than DTCOM Direct. In addition to that, ICICI Bank is 1.3 times more volatile than DTCOM Direct. It trades about 0.0 of its total potential returns per unit of risk. DTCOM Direct is currently generating about 0.18 per unit of volatility. If you would invest  437.00  in DTCOM Direct on October 8, 2024 and sell it today you would earn a total of  6.00  from holding DTCOM Direct or generate 1.37% return on investment over 90 days.

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

ICICI Bank Limited  vs.  DTCOM Direct

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.

DTCOM Direct

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DTCOM Direct are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DTCOM Direct is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ICICI Bank and DTCOM Direct

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

The idea behind ICICI Bank Limited and DTCOM Direct 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.