Correlation Between Invitation Homes and ICICI Bank

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

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

Diversification Opportunities for Invitation Homes and ICICI Bank

0.34

Correlation Coefficient

Invitation Homes  ICICI Bank

Weak diversification

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

Pair Corralation between Invitation Homes and ICICI Bank

Assuming the 90 days trading horizon Invitation Homes is expected to generate 1.95 times less return on investment than ICICI Bank. But when comparing it to its historical volatility, Invitation Homes is 2.11 times less risky than ICICI Bank. It trades about 0.11 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,730  in ICICI Bank Limited on October 24, 2024 and sell it today you would earn a total of  5,270  from holding ICICI Bank Limited or generate 44.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.9%
Values	Daily Returns

Invitation Homes  vs.  ICICI Bank Limited

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invitation Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Invitation Homes and ICICI Bank

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

The idea behind Invitation Homes and ICICI Bank Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.