Correlation Between ICICI Bank and Shinhan Financial

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

Diversification Opportunities for ICICI Bank and Shinhan Financial

0.21

Correlation Coefficient

ICICI Bank  Shinhan Financial

Modest diversification

The 3 months correlation between ICICI and Shinhan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan 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 Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of ICICI Bank i.e., ICICI Bank and Shinhan Financial go up and down completely randomly.

Pair Corralation between ICICI Bank and Shinhan Financial

Considering the 90-day investment horizon ICICI Bank Limited is expected to under-perform the Shinhan Financial. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 1.25 times less risky than Shinhan Financial. The stock trades about -0.43 of its potential returns per unit of risk. The Shinhan Financial Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,366  in Shinhan Financial Group on October 27, 2024 and sell it today you would earn a total of  150.00  from holding Shinhan Financial Group or generate 4.46% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Shinhan Financial Group

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ICICI Bank and Shinhan Financial

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

The idea behind ICICI Bank Limited and Shinhan Financial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .