Correlation Between ICICI Lombard and Eros International

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

Diversification Opportunities for ICICI Lombard and Eros International

0.87

Correlation Coefficient

ICICI Lombard  Eros International

Very poor diversification

The 3 months correlation between ICICI and Eros is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media 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 Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and Eros International go up and down completely randomly.

Pair Corralation between ICICI Lombard and Eros International

Assuming the 90 days trading horizon ICICI Lombard General is expected to generate 0.46 times more return on investment than Eros International. However, ICICI Lombard General is 2.17 times less risky than Eros International. It trades about 0.09 of its potential returns per unit of risk. Eros International Media is currently generating about -0.02 per unit of risk. If you would invest  104,513  in ICICI Lombard General on October 5, 2024 and sell it today you would earn a total of  78,777  from holding ICICI Lombard General or generate 75.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.78%
Values	Daily Returns

ICICI Lombard General  vs.  Eros International Media

ICICI Lombard General

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ICICI Lombard and Eros International

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

The idea behind ICICI Lombard General and Eros International Media 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.