Correlation Between ICICI Bank and Johnson Johnson

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

Diversification Opportunities for ICICI Bank and Johnson Johnson

-0.19

Correlation Coefficient

ICICI Bank  Johnson Johnson

Good diversification

The 3 months correlation between ICICI and Johnson is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of ICICI Bank i.e., ICICI Bank and Johnson Johnson go up and down completely randomly.

Pair Corralation between ICICI Bank and Johnson Johnson

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 1.13 times more return on investment than Johnson Johnson. However, ICICI Bank is 1.13 times more volatile than Johnson Johnson. It trades about 0.14 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.08 per unit of risk. If you would invest  11,383  in ICICI Bank Limited on October 8, 2024 and sell it today you would earn a total of  7,636  from holding ICICI Bank Limited or generate 67.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.31%
Values	Daily Returns

ICICI Bank Limited  vs.  Johnson Johnson

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.

Johnson Johnson

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICICI Bank and Johnson Johnson

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

The idea behind ICICI Bank Limited and Johnson Johnson 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.