Correlation Between ICICI Lombard and Reliance Home

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

Diversification Opportunities for ICICI Lombard and Reliance Home

-0.05

Correlation Coefficient

ICICI Lombard  Reliance Home

Good diversification

The 3 months correlation between ICICI and Reliance is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and Reliance Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Home Finance 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 Reliance Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Home Finance has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and Reliance Home go up and down completely randomly.

Pair Corralation between ICICI Lombard and Reliance Home

Assuming the 90 days trading horizon ICICI Lombard General is expected to under-perform the Reliance Home. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Lombard General is 2.21 times less risky than Reliance Home. The stock trades about -0.09 of its potential returns per unit of risk. The Reliance Home Finance is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  225.00  in Reliance Home Finance on November 29, 2024 and sell it today you would earn a total of  95.00  from holding Reliance Home Finance or generate 42.22% return on investment over 90 days.

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

ICICI Lombard General  vs.  Reliance Home Finance

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 uncertain 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.

Reliance Home Finance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Home Finance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Reliance Home unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Lombard and Reliance Home

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

The idea behind ICICI Lombard General and Reliance Home Finance 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.