Correlation Between ICICI Securities and GM Breweries

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

Diversification Opportunities for ICICI Securities and GM Breweries

0.14

Correlation Coefficient

ICICI Securities  GM Breweries

Average diversification

The 3 months correlation between ICICI and GMBREW is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Securities Limited and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries 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 GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of ICICI Securities i.e., ICICI Securities and GM Breweries go up and down completely randomly.

Pair Corralation between ICICI Securities and GM Breweries

Assuming the 90 days trading horizon ICICI Securities Limited is expected to under-perform the GM Breweries. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Securities Limited is 1.7 times less risky than GM Breweries. The stock trades about -0.03 of its potential returns per unit of risk. The GM Breweries Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  81,175  in GM Breweries Limited on October 7, 2024 and sell it today you would earn a total of  3,500  from holding GM Breweries Limited or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ICICI Securities Limited  vs.  GM Breweries Limited

ICICI Securities

Risk-Adjusted Performance

0 of 100

Very 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

GM Breweries Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GM Breweries Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GM Breweries 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 Securities and GM Breweries

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

The idea behind ICICI Securities Limited and GM Breweries 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.