Correlation Between Reliance Industries and ICICI Securities

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

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

Diversification Opportunities for Reliance Industries and ICICI Securities

0.48

Correlation Coefficient

Reliance Industries  ICICI Securities

Very weak diversification

The 3 months correlation between Reliance and ICICI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and Reliance Industries 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 Reliance Industries Limited 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 Reliance Industries i.e., Reliance Industries and ICICI Securities go up and down completely randomly.

Pair Corralation between Reliance Industries and ICICI Securities

Assuming the 90 days trading horizon Reliance Industries Limited is expected to under-perform the ICICI Securities. In addition to that, Reliance Industries is 1.2 times more volatile than ICICI Securities Limited. It trades about -0.19 of its total potential returns per unit of risk. ICICI Securities Limited is currently generating about -0.12 per unit of volatility. If you would invest  87,305  in ICICI Securities Limited on September 26, 2024 and sell it today you would lose (2,345) from holding ICICI Securities Limited or give up 2.69% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  ICICI Securities Limited

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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

Pair Trading with Reliance Industries and ICICI Securities

The main advantage of trading using opposite Reliance Industries and ICICI Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Limited 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.