Correlation Between ICICI Lombard and HDFC Asset

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

Diversification Opportunities for ICICI Lombard and HDFC Asset

0.51

Correlation Coefficient

ICICI Lombard  HDFC Asset

Very weak diversification

The 3 months correlation between ICICI and HDFC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset 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 HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and HDFC Asset go up and down completely randomly.

Pair Corralation between ICICI Lombard and HDFC Asset

Assuming the 90 days trading horizon ICICI Lombard General is expected to under-perform the HDFC Asset. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Lombard General is 1.02 times less risky than HDFC Asset. The stock trades about -0.23 of its potential returns per unit of risk. The HDFC Asset Management is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  436,260  in HDFC Asset Management on October 5, 2024 and sell it today you would lose (8,065) from holding HDFC Asset Management or give up 1.85% 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.  HDFC Asset Management

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.

HDFC Asset Management

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ICICI Lombard and HDFC Asset

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

The idea behind ICICI Lombard General and HDFC Asset 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.