Correlation Between ICICI Bank and First Community

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

Diversification Opportunities for ICICI Bank and First Community

-0.45

Correlation Coefficient

ICICI Bank  First Community

Very good diversification

The 3 months correlation between ICICI and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of ICICI Bank i.e., ICICI Bank and First Community go up and down completely randomly.

Pair Corralation between ICICI Bank and First Community

Considering the 90-day investment horizon ICICI Bank Limited is expected to under-perform the First Community. In addition to that, ICICI Bank is 1.23 times more volatile than First Community Financial. It trades about -0.13 of its total potential returns per unit of risk. First Community Financial is currently generating about 0.22 per unit of volatility. If you would invest  1,151  in First Community Financial on October 4, 2024 and sell it today you would earn a total of  53.00  from holding First Community Financial or generate 4.6% return on investment over 90 days.

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

ICICI Bank Limited  vs.  First Community Financial

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. In spite of very healthy fundamental drivers, ICICI Bank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Community Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with ICICI Bank and First Community

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

The idea behind ICICI Bank Limited and First Community Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.