Correlation Between ICICI Securities and Hindustan Foods

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

Diversification Opportunities for ICICI Securities and Hindustan Foods

0.31

Correlation Coefficient

ICICI Securities  Hindustan Foods

Weak diversification

The 3 months correlation between ICICI and Hindustan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Securities Limited and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods 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 Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of ICICI Securities i.e., ICICI Securities and Hindustan Foods go up and down completely randomly.

Pair Corralation between ICICI Securities and Hindustan Foods

Assuming the 90 days trading horizon ICICI Securities Limited is expected to under-perform the Hindustan Foods. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Securities Limited is 1.75 times less risky than Hindustan Foods. The stock trades about -0.13 of its potential returns per unit of risk. The Hindustan Foods Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  54,775  in Hindustan Foods Limited on September 25, 2024 and sell it today you would lose (1,415) from holding Hindustan Foods Limited or give up 2.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

ICICI Securities Limited  vs.  Hindustan Foods 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ICICI Securities and Hindustan Foods

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

The idea behind ICICI Securities Limited and Hindustan Foods 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.