Correlation Between ICICI Lombard and 21st Century

Can any of the company-specific risk be diversified away by investing in both ICICI Lombard and 21st Century 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 Lombard and 21st Century into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICICI Lombard General and 21st Century Management, you can compare the effects of market volatilities on ICICI Lombard and 21st Century 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 Lombard with a short position of 21st Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Lombard and 21st Century.

Diversification Opportunities for ICICI Lombard and 21st Century

0.41

Correlation Coefficient

ICICI Lombard  21st Century

Very weak diversification

The 3 months correlation between ICICI and 21st is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and 21st Century Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21st Century Management and ICICI Lombard 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 Lombard General are associated (or correlated) with 21st Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21st Century Management has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and 21st Century go up and down completely randomly.

Pair Corralation between ICICI Lombard and 21st Century

Assuming the 90 days trading horizon ICICI Lombard General is expected to generate 1.06 times more return on investment than 21st Century. However, ICICI Lombard is 1.06 times more volatile than 21st Century Management. It trades about -0.04 of its potential returns per unit of risk. 21st Century Management is currently generating about -0.41 per unit of risk. If you would invest  180,470  in ICICI Lombard General on November 20, 2024 and sell it today you would lose (7,965) from holding ICICI Lombard General or give up 4.41% of portfolio value over 90 days.

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

ICICI Lombard General  vs.  21st Century Management

ICICI Lombard General

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICICI Lombard General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, ICICI Lombard is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

21st Century Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days 21st Century Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ICICI Lombard and 21st Century

The main advantage of trading using opposite ICICI Lombard and 21st Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Lombard position performs unexpectedly, 21st Century 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 21st Century will offset losses from the drop in 21st Century's long position.

The idea behind ICICI Lombard General and 21st Century 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.