Correlation Between ICICI Bank and Electronic Arts

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

Diversification Opportunities for ICICI Bank and Electronic Arts

0.8

Correlation Coefficient

ICICI Bank  Electronic Arts

Very poor diversification

The 3 months correlation between ICICI and Electronic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of ICICI Bank i.e., ICICI Bank and Electronic Arts go up and down completely randomly.

Pair Corralation between ICICI Bank and Electronic Arts

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.53 times more return on investment than Electronic Arts. However, ICICI Bank Limited is 1.89 times less risky than Electronic Arts. It trades about 0.0 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.58 per unit of risk. If you would invest  19,019  in ICICI Bank Limited on October 8, 2024 and sell it today you would earn a total of  0.00  from holding ICICI Bank Limited or generate 0.0% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Electronic Arts

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.

Electronic Arts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and Electronic Arts

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

The idea behind ICICI Bank Limited and Electronic Arts 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.