Correlation Between ICICI Securities and Power Finance

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

Diversification Opportunities for ICICI Securities and Power Finance

0.69

Correlation Coefficient

ICICI Securities  Power Finance

Poor diversification

The 3 months correlation between ICICI and Power is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Securities Limited and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of ICICI Securities i.e., ICICI Securities and Power Finance go up and down completely randomly.

Pair Corralation between ICICI Securities and Power Finance

Assuming the 90 days trading horizon ICICI Securities is expected to generate 2.66 times less return on investment than Power Finance. But when comparing it to its historical volatility, ICICI Securities Limited is 2.17 times less risky than Power Finance. It trades about 0.08 of its potential returns per unit of risk. Power Finance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,952  in Power Finance on October 5, 2024 and sell it today you would earn a total of  34,983  from holding Power Finance or generate 319.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

ICICI Securities Limited  vs.  Power Finance

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

Power Finance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Power Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ICICI Securities and Power Finance

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

The idea behind ICICI Securities Limited and Power Finance 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.