Correlation Between ICICI Bank and Xchanging Solutions

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

Diversification Opportunities for ICICI Bank and Xchanging Solutions

0.27

Correlation Coefficient

ICICI Bank  Xchanging Solutions

Modest diversification

The 3 months correlation between ICICI and Xchanging is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions 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 Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of ICICI Bank i.e., ICICI Bank and Xchanging Solutions go up and down completely randomly.

Pair Corralation between ICICI Bank and Xchanging Solutions

Assuming the 90 days trading horizon ICICI Bank is expected to generate 4.24 times less return on investment than Xchanging Solutions. But when comparing it to its historical volatility, ICICI Bank Limited is 2.18 times less risky than Xchanging Solutions. It trades about 0.04 of its potential returns per unit of risk. Xchanging Solutions Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,585  in Xchanging Solutions Limited on September 23, 2024 and sell it today you would earn a total of  366.00  from holding Xchanging Solutions Limited or generate 3.46% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Xchanging Solutions Limited

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

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with ICICI Bank and Xchanging Solutions

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

The idea behind ICICI Bank Limited and Xchanging Solutions Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.