Correlation Between ICICI Bank and Lloyds Banking

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

Diversification Opportunities for ICICI Bank and Lloyds Banking

-0.34

Correlation Coefficient

ICICI Bank  Lloyds Banking

Very good diversification

The 3 months correlation between ICICI and Lloyds is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of ICICI Bank i.e., ICICI Bank and Lloyds Banking go up and down completely randomly.

Pair Corralation between ICICI Bank and Lloyds Banking

Assuming the 90 days trading horizon ICICI Bank is expected to generate 47.35 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, ICICI Bank Limited is 3.14 times less risky than Lloyds Banking. It trades about 0.0 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,658  in Lloyds Banking Group on October 8, 2024 and sell it today you would earn a total of  18.00  from holding Lloyds Banking Group or generate 1.09% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Lloyds Banking Group

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.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lloyds Banking 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 Lloyds Banking

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

The idea behind ICICI Bank Limited and Lloyds Banking Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.