Correlation Between ICICI Bank and Punjab National

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

Diversification Opportunities for ICICI Bank and Punjab National

0.79

Correlation Coefficient

ICICI Bank  Punjab National

Poor diversification

The 3 months correlation between ICICI and Punjab is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Punjab National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab National Bank 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 Punjab National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab National Bank has no effect on the direction of ICICI Bank i.e., ICICI Bank and Punjab National go up and down completely randomly.

Pair Corralation between ICICI Bank and Punjab National

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.5 times more return on investment than Punjab National. However, ICICI Bank Limited is 2.0 times less risky than Punjab National. It trades about -0.12 of its potential returns per unit of risk. Punjab National Bank is currently generating about -0.14 per unit of risk. If you would invest  130,345  in ICICI Bank Limited on December 1, 2024 and sell it today you would lose (9,935) from holding ICICI Bank Limited or give up 7.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

ICICI Bank Limited  vs.  Punjab National Bank

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.

Punjab National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Punjab National Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ICICI Bank and Punjab National

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

The idea behind ICICI Bank Limited and Punjab National Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.