Correlation Between ICICI Bank and Sapphire Foods

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

Diversification Opportunities for ICICI Bank and Sapphire Foods

-0.25

Correlation Coefficient

ICICI Bank  Sapphire Foods

Very good diversification

The 3 months correlation between ICICI and Sapphire is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods India 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 Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of ICICI Bank i.e., ICICI Bank and Sapphire Foods go up and down completely randomly.

Pair Corralation between ICICI Bank and Sapphire Foods

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the Sapphire Foods. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 2.29 times less risky than Sapphire Foods. The stock trades about -0.11 of its potential returns per unit of risk. The Sapphire Foods India is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  34,105  in Sapphire Foods India on October 5, 2024 and sell it today you would earn a total of  45.00  from holding Sapphire Foods India or generate 0.13% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Sapphire Foods India

ICICI Bank Limited

Risk-Adjusted Performance

5 of 100

Insignificant

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.

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ICICI Bank and Sapphire Foods

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

The idea behind ICICI Bank Limited and Sapphire Foods India 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.