Correlation Between ICICI Bank and Cholamandalam Investment

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

Diversification Opportunities for ICICI Bank and Cholamandalam Investment

-0.2

Correlation Coefficient

ICICI Bank  Cholamandalam Investment

Good diversification

The 3 months correlation between ICICI and Cholamandalam is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment 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 Cholamandalam Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Investment has no effect on the direction of ICICI Bank i.e., ICICI Bank and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between ICICI Bank and Cholamandalam Investment

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the Cholamandalam Investment. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 2.46 times less risky than Cholamandalam Investment. The stock trades about -0.12 of its potential returns per unit of risk. The Cholamandalam Investment and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  124,947  in Cholamandalam Investment and on November 30, 2024 and sell it today you would earn a total of  15,128  from holding Cholamandalam Investment and or generate 12.11% 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.  Cholamandalam Investment and

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 uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cholamandalam Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Investment and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Cholamandalam Investment demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and Cholamandalam Investment

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

The idea behind ICICI Bank Limited and Cholamandalam Investment and 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 CEOs Directory module to screen CEOs from public companies around the world.