Correlation Between ICICI Securities and Patanjali Foods

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

Diversification Opportunities for ICICI Securities and Patanjali Foods

0.34

Correlation Coefficient

ICICI Securities  Patanjali Foods

Weak diversification

The 3 months correlation between ICICI and Patanjali is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Securities Limited and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of ICICI Securities i.e., ICICI Securities and Patanjali Foods go up and down completely randomly.

Pair Corralation between ICICI Securities and Patanjali Foods

Assuming the 90 days trading horizon ICICI Securities Limited is expected to under-perform the Patanjali Foods. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Securities Limited is 1.39 times less risky than Patanjali Foods. The stock trades about -0.07 of its potential returns per unit of risk. The Patanjali Foods Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  189,010  in Patanjali Foods Limited on October 7, 2024 and sell it today you would lose (2,525) from holding Patanjali Foods Limited or give up 1.34% of portfolio value over 90 days.

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

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

Patanjali Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Patanjali Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICICI Securities and Patanjali Foods

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

The idea behind ICICI Securities Limited and Patanjali 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.