Correlation Between ICICI Lombard and Fortis Healthcare

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

Diversification Opportunities for ICICI Lombard and Fortis Healthcare

0.65

Correlation Coefficient

ICICI Lombard  Fortis Healthcare

Poor diversification

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

Pair Corralation between ICICI Lombard and Fortis Healthcare

Assuming the 90 days trading horizon ICICI Lombard General is expected to under-perform the Fortis Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Lombard General is 1.57 times less risky than Fortis Healthcare. The stock trades about -0.1 of its potential returns per unit of risk. The Fortis Healthcare Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  65,015  in Fortis Healthcare Limited on November 28, 2024 and sell it today you would lose (4,180) from holding Fortis Healthcare Limited or give up 6.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

ICICI Lombard General  vs.  Fortis Healthcare Limited

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 latest weak 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.

Fortis Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortis Healthcare Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortis Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICICI Lombard and Fortis Healthcare

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

The idea behind ICICI Lombard General and Fortis Healthcare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.