Correlation Between ICICI Bank and Zensar Technologies

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

Diversification Opportunities for ICICI Bank and Zensar Technologies

0.65

Correlation Coefficient

ICICI Bank  Zensar Technologies

Poor diversification

The 3 months correlation between ICICI and Zensar is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Zensar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zensar Technologies 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 Zensar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zensar Technologies has no effect on the direction of ICICI Bank i.e., ICICI Bank and Zensar Technologies go up and down completely randomly.

Pair Corralation between ICICI Bank and Zensar Technologies

Assuming the 90 days trading horizon ICICI Bank is expected to generate 3.23 times less return on investment than Zensar Technologies. But when comparing it to its historical volatility, ICICI Bank Limited is 2.17 times less risky than Zensar Technologies. It trades about 0.08 of its potential returns per unit of risk. Zensar Technologies Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  20,233  in Zensar Technologies Limited on September 28, 2024 and sell it today you would earn a total of  52,787  from holding Zensar Technologies Limited or generate 260.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

ICICI Bank Limited  vs.  Zensar Technologies Limited

ICICI Bank Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Zensar Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zensar Technologies Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Zensar Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ICICI Bank and Zensar Technologies

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

The idea behind ICICI Bank Limited and Zensar Technologies 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.