Correlation Between ICICI Bank and Mangalam Drugs

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

Diversification Opportunities for ICICI Bank and Mangalam Drugs

0.6

Correlation Coefficient

ICICI Bank  Mangalam Drugs

Poor diversification

The 3 months correlation between ICICI and Mangalam is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Mangalam Drugs And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalam Drugs And 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 Mangalam Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalam Drugs And has no effect on the direction of ICICI Bank i.e., ICICI Bank and Mangalam Drugs go up and down completely randomly.

Pair Corralation between ICICI Bank and Mangalam Drugs

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.44 times more return on investment than Mangalam Drugs. However, ICICI Bank Limited is 2.25 times less risky than Mangalam Drugs. It trades about 0.07 of its potential returns per unit of risk. Mangalam Drugs And is currently generating about 0.01 per unit of risk. If you would invest  84,272  in ICICI Bank Limited on October 24, 2024 and sell it today you would earn a total of  35,773  from holding ICICI Bank Limited or generate 42.45% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Mangalam Drugs And

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

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 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.

Mangalam Drugs And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mangalam Drugs And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Mangalam Drugs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICICI Bank and Mangalam Drugs

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

The idea behind ICICI Bank Limited and Mangalam Drugs 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.