Correlation Between ICICI Bank and THAI BEVERAGE

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

Diversification Opportunities for ICICI Bank and THAI BEVERAGE

0.43

Correlation Coefficient

ICICI Bank  THAI BEVERAGE

Very weak diversification

The 3 months correlation between ICICI and THAI is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE 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 THAI BEVERAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THAI BEVERAGE has no effect on the direction of ICICI Bank i.e., ICICI Bank and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between ICICI Bank and THAI BEVERAGE

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the THAI BEVERAGE. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 1.33 times less risky than THAI BEVERAGE. The stock trades about -0.11 of its potential returns per unit of risk. The THAI BEVERAGE is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  37.00  in THAI BEVERAGE on December 19, 2024 and sell it today you would lose (3.00) from holding THAI BEVERAGE or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

ICICI Bank Limited  vs.  THAI BEVERAGE

ICICI Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

THAI BEVERAGE

Risk-Adjusted Performance

Very Weak

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ICICI Bank and THAI BEVERAGE

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

The idea behind ICICI Bank Limited and THAI BEVERAGE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.