Correlation Between ICICI Bank and JB Chemicals

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

Diversification Opportunities for ICICI Bank and JB Chemicals

0.13

Correlation Coefficient

ICICI Bank  JB Chemicals

Average diversification

The 3 months correlation between ICICI and JBCHEPHARM is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and JB Chemicals Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Chemicals Pharmac 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 JB Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Chemicals Pharmac has no effect on the direction of ICICI Bank i.e., ICICI Bank and JB Chemicals go up and down completely randomly.

Pair Corralation between ICICI Bank and JB Chemicals

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.49 times more return on investment than JB Chemicals. However, ICICI Bank Limited is 2.03 times less risky than JB Chemicals. It trades about 0.07 of its potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about -0.09 per unit of risk. If you would invest  129,345  in ICICI Bank Limited on December 29, 2024 and sell it today you would earn a total of  5,490  from holding ICICI Bank Limited or generate 4.24% return on investment over 90 days.

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

ICICI Bank Limited  vs.  JB Chemicals Pharmaceuticals

ICICI Bank Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 5 (%) 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.

JB Chemicals Pharmac

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with ICICI Bank and JB Chemicals

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

The idea behind ICICI Bank Limited and JB Chemicals Pharmaceuticals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.