Correlation Between ICICI Bank and Investment Trust

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

Diversification Opportunities for ICICI Bank and Investment Trust

0.26

Correlation Coefficient

ICICI Bank  Investment Trust

Modest diversification

The 3 months correlation between ICICI and Investment is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of ICICI Bank i.e., ICICI Bank and Investment Trust go up and down completely randomly.

Pair Corralation between ICICI Bank and Investment Trust

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.84 times more return on investment than Investment Trust. However, ICICI Bank Limited is 1.2 times less risky than Investment Trust. It trades about -0.27 of its potential returns per unit of risk. The Investment Trust is currently generating about -0.48 per unit of risk. If you would invest  132,350  in ICICI Bank Limited on October 9, 2024 and sell it today you would lose (5,940) from holding ICICI Bank Limited or give up 4.49% of portfolio value over 90 days.

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

ICICI Bank Limited  vs.  The Investment Trust

ICICI Bank Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ICICI Bank and Investment Trust

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

The idea behind ICICI Bank Limited and The Investment Trust 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.