Correlation Between SHINHAN FINL and ICICI Bank

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

By analyzing existing cross correlation between SHINHAN FINL ADR1 and ICICI Bank Limited, you can compare the effects of market volatilities on SHINHAN FINL and ICICI Bank 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 SHINHAN FINL with a short position of ICICI Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHINHAN FINL and ICICI Bank.

Diversification Opportunities for SHINHAN FINL and ICICI Bank

-0.7

Correlation Coefficient

SHINHAN FINL  ICICI Bank

Excellent diversification

The 3 months correlation between SHINHAN and ICICI is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SHINHAN FINL ADR1 and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited and SHINHAN FINL 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 SHINHAN FINL ADR1 are associated (or correlated) with ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of SHINHAN FINL i.e., SHINHAN FINL and ICICI Bank go up and down completely randomly.

Pair Corralation between SHINHAN FINL and ICICI Bank

Assuming the 90 days trading horizon SHINHAN FINL ADR1 is expected to under-perform the ICICI Bank. In addition to that, SHINHAN FINL is 1.65 times more volatile than ICICI Bank Limited. It trades about -0.11 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.06 per unit of volatility. If you would invest  2,840  in ICICI Bank Limited on September 26, 2024 and sell it today you would earn a total of  100.00  from holding ICICI Bank Limited or generate 3.52% return on investment over 90 days.

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

SHINHAN FINL ADR1  vs.  ICICI Bank Limited

SHINHAN FINL ADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHINHAN FINL ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ICICI Bank Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, ICICI Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SHINHAN FINL and ICICI Bank

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

The idea behind SHINHAN FINL ADR1 and ICICI Bank 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.