Correlation Between ICICI Bank and Jubilant Foodworks

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

Diversification Opportunities for ICICI Bank and Jubilant Foodworks

0.51

Correlation Coefficient

ICICI Bank  Jubilant Foodworks

Very weak diversification

The 3 months correlation between ICICI and Jubilant is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks 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 Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of ICICI Bank i.e., ICICI Bank and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between ICICI Bank and Jubilant Foodworks

Assuming the 90 days trading horizon ICICI Bank is expected to generate 1.29 times less return on investment than Jubilant Foodworks. But when comparing it to its historical volatility, ICICI Bank Limited is 1.49 times less risky than Jubilant Foodworks. It trades about 0.1 of its potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  42,540  in Jubilant Foodworks Limited on October 5, 2024 and sell it today you would earn a total of  33,075  from holding Jubilant Foodworks Limited or generate 77.75% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Jubilant Foodworks Limited

ICICI Bank Limited

Risk-Adjusted Performance

5 of 100

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Jubilant Foodworks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Bank and Jubilant Foodworks

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

The idea behind ICICI Bank Limited and Jubilant Foodworks 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.