Correlation Between ICICI Securities and CEAT

Can any of the company-specific risk be diversified away by investing in both ICICI Securities and CEAT 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 Securities and CEAT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICICI Securities Limited and CEAT Limited, you can compare the effects of market volatilities on ICICI Securities and CEAT 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 Securities with a short position of CEAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Securities and CEAT.

Diversification Opportunities for ICICI Securities and CEAT

0.45

Correlation Coefficient

ICICI Securities  CEAT

Very weak diversification

The 3 months correlation between ICICI and CEAT is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Securities Limited and CEAT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEAT Limited and ICICI Securities 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 Securities Limited are associated (or correlated) with CEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEAT Limited has no effect on the direction of ICICI Securities i.e., ICICI Securities and CEAT go up and down completely randomly.

Pair Corralation between ICICI Securities and CEAT

Assuming the 90 days trading horizon ICICI Securities Limited is expected to generate 0.42 times more return on investment than CEAT. However, ICICI Securities Limited is 2.37 times less risky than CEAT. It trades about 0.01 of its potential returns per unit of risk. CEAT Limited is currently generating about -0.04 per unit of risk. If you would invest  83,955  in ICICI Securities Limited on November 19, 2024 and sell it today you would earn a total of  210.00  from holding ICICI Securities Limited or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ICICI Securities Limited  vs.  CEAT Limited

ICICI Securities

Risk-Adjusted Performance

Weak

Over the last 90 days ICICI Securities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ICICI Securities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CEAT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CEAT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ICICI Securities and CEAT

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

The idea behind ICICI Securities Limited and CEAT 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.