Correlation Between Mastercard Incorporated and ICICI Bank

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

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

Diversification Opportunities for Mastercard Incorporated and ICICI Bank

0.37

Correlation Coefficient

Mastercard Incorporated  ICICI Bank

Weak diversification

The 3 months correlation between Mastercard and ICICI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated i.e., Mastercard Incorporated and ICICI Bank go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and ICICI Bank

Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 0.98 times more return on investment than ICICI Bank. However, Mastercard Incorporated is 1.02 times less risky than ICICI Bank. It trades about -0.06 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about -0.08 per unit of risk. If you would invest  10,764  in Mastercard Incorporated on December 26, 2024 and sell it today you would lose (662.00) from holding Mastercard Incorporated or give up 6.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Mastercard Incorporated  vs.  ICICI Bank Limited

Mastercard Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mastercard Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Mastercard Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ICICI Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mastercard Incorporated and ICICI Bank

The main advantage of trading using opposite Mastercard Incorporated and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated 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 Mastercard Incorporated 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 Commodity Directory module to find actively traded commodities issued by global exchanges.