Correlation Between Sapphire Foods and ICICI Securities

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

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

Diversification Opportunities for Sapphire Foods and ICICI Securities

-0.03

Correlation Coefficient

Sapphire Foods  ICICI Securities

Good diversification

The 3 months correlation between Sapphire and ICICI is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and ICICI Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Securities and Sapphire Foods 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 Sapphire Foods India 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 Sapphire Foods i.e., Sapphire Foods and ICICI Securities go up and down completely randomly.

Pair Corralation between Sapphire Foods and ICICI Securities

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 1.56 times more return on investment than ICICI Securities. However, Sapphire Foods is 1.56 times more volatile than ICICI Securities Limited. It trades about 0.01 of its potential returns per unit of risk. ICICI Securities Limited is currently generating about -0.03 per unit of risk. If you would invest  34,780  in Sapphire Foods India on October 7, 2024 and sell it today you would earn a total of  105.00  from holding Sapphire Foods India or generate 0.3% return on investment over 90 days.

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

Sapphire Foods India  vs.  ICICI Securities Limited

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

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

Pair Trading with Sapphire Foods and ICICI Securities

The main advantage of trading using opposite Sapphire Foods and ICICI Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapphire Foods 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 Sapphire Foods India 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 Transaction History module to view history of all your transactions and understand their impact on performance.