Correlation Between ICICI Lombard and Tata Investment

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

Diversification Opportunities for ICICI Lombard and Tata Investment

0.58

Correlation Coefficient

ICICI Lombard  Tata Investment

Very weak diversification

The 3 months correlation between ICICI and Tata is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment 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 Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and Tata Investment go up and down completely randomly.

Pair Corralation between ICICI Lombard and Tata Investment

Assuming the 90 days trading horizon ICICI Lombard General is expected to under-perform the Tata Investment. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Lombard General is 1.35 times less risky than Tata Investment. The stock trades about -0.19 of its potential returns per unit of risk. The Tata Investment is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  721,380  in Tata Investment on August 31, 2024 and sell it today you would lose (53,940) from holding Tata Investment or give up 7.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

ICICI Lombard General  vs.  Tata Investment

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 inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with ICICI Lombard and Tata Investment

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

The idea behind ICICI Lombard General and Tata Investment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.