Correlation Between Shyam Telecom and ICICI Bank

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

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

Diversification Opportunities for Shyam Telecom and ICICI Bank

0.23

Correlation Coefficient

Shyam Telecom  ICICI Bank

Modest diversification

The 3 months correlation between Shyam and ICICI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Telecom Limited 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 Shyam Telecom 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 Shyam Telecom Limited 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 Shyam Telecom i.e., Shyam Telecom and ICICI Bank go up and down completely randomly.

Pair Corralation between Shyam Telecom and ICICI Bank

Assuming the 90 days trading horizon Shyam Telecom Limited is expected to generate 2.49 times more return on investment than ICICI Bank. However, Shyam Telecom is 2.49 times more volatile than ICICI Bank Limited. It trades about 0.31 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.06 per unit of risk. If you would invest  1,497  in Shyam Telecom Limited on September 3, 2024 and sell it today you would earn a total of  1,303  from holding Shyam Telecom Limited or generate 87.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Shyam Telecom Limited  vs.  ICICI Bank Limited

Shyam Telecom Limited

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Telecom Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Shyam Telecom exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICICI Bank Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ICICI Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shyam Telecom and ICICI Bank

The main advantage of trading using opposite Shyam Telecom and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shyam Telecom 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 Shyam Telecom Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.