Correlation Between ICICI Bank and UTI Asset

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

Diversification Opportunities for ICICI Bank and UTI Asset

0.58

Correlation Coefficient

ICICI Bank  UTI Asset

Very weak diversification

The 3 months correlation between ICICI and UTI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and UTI Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Asset Management 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 UTI Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Asset Management has no effect on the direction of ICICI Bank i.e., ICICI Bank and UTI Asset go up and down completely randomly.

Pair Corralation between ICICI Bank and UTI Asset

Assuming the 90 days trading horizon ICICI Bank Limited is expected to under-perform the UTI Asset. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 2.86 times less risky than UTI Asset. The stock trades about -0.34 of its potential returns per unit of risk. The UTI Asset Management is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  123,090  in UTI Asset Management on October 23, 2024 and sell it today you would earn a total of  1,930  from holding UTI Asset Management or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

ICICI Bank Limited  vs.  UTI Asset Management

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

UTI Asset Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UTI Asset is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICICI Bank and UTI Asset

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

The idea behind ICICI Bank Limited and UTI Asset Management 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.