Correlation Between Rainbow Childrens and ICICI Securities

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

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

Diversification Opportunities for Rainbow Childrens and ICICI Securities

0.3

Correlation Coefficient

Rainbow Childrens  ICICI Securities

Weak diversification

The 3 months correlation between Rainbow and ICICI is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Childrens Medicare and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and Rainbow Childrens 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 Rainbow Childrens Medicare are associated (or correlated) with ICICI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Securities has no effect on the direction of Rainbow Childrens i.e., Rainbow Childrens and ICICI Securities go up and down completely randomly.

Pair Corralation between Rainbow Childrens and ICICI Securities

Assuming the 90 days trading horizon Rainbow Childrens Medicare is expected to generate 1.42 times more return on investment than ICICI Securities. However, Rainbow Childrens is 1.42 times more volatile than ICICI Securities Limited. It trades about 0.06 of its potential returns per unit of risk. ICICI Securities Limited is currently generating about 0.07 per unit of risk. If you would invest  106,026  in Rainbow Childrens Medicare on October 6, 2024 and sell it today you would earn a total of  49,754  from holding Rainbow Childrens Medicare or generate 46.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.34%
Values	Daily Returns

Rainbow Childrens Medicare  vs.  ICICI Securities Limited

Rainbow Childrens

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental drivers, Rainbow Childrens showed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Rainbow Childrens and ICICI Securities

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

The idea behind Rainbow Childrens Medicare and ICICI Securities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.