Correlation Between Penn National and ICICI Bank

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

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

Diversification Opportunities for Penn National and ICICI Bank

0.19

Correlation Coefficient

Penn National  ICICI Bank

Average diversification

The 3 months correlation between Penn and ICICI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming 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 Penn National 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 Penn National Gaming 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 Penn National i.e., Penn National and ICICI Bank go up and down completely randomly.

Pair Corralation between Penn National and ICICI Bank

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the ICICI Bank. In addition to that, Penn National is 5.13 times more volatile than ICICI Bank Limited. It trades about -0.08 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.0 per unit of volatility. If you would invest  19,019  in ICICI Bank Limited on October 8, 2024 and sell it today you would earn a total of  0.00  from holding ICICI Bank Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Penn National Gaming  vs.  ICICI Bank Limited

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

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

ICICI Bank Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, ICICI Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and ICICI Bank

The main advantage of trading using opposite Penn National and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National 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 Penn National Gaming 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.