Correlation Between ICICI Bank and ITI

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

Diversification Opportunities for ICICI Bank and ITI

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between ICICI and ITI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited 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 ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of ICICI Bank i.e., ICICI Bank and ITI go up and down completely randomly.

Pair Corralation between ICICI Bank and ITI

Assuming the 90 days trading horizon ICICI Bank is expected to generate 45.3 times less return on investment than ITI. But when comparing it to its historical volatility, ICICI Bank Limited is 5.35 times less risky than ITI. It trades about 0.02 of its potential returns per unit of risk. ITI Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  24,595  in ITI Limited on October 9, 2024 and sell it today you would earn a total of  24,400  from holding ITI Limited or generate 99.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.39%
ValuesDaily Returns

ICICI Bank Limited  vs.  ITI Limited

 Performance 
       Timeline  
ICICI Bank Limited 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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 basic indicators, ICICI Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
ITI Limited 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICICI Bank and ITI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ICICI Bank and ITI

The main advantage of trading using opposite ICICI Bank and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, ITI 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 ITI will offset losses from the drop in ITI's long position.
The idea behind ICICI Bank Limited and ITI 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.
Check out your portfolio center.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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