Correlation Between State Trading and ICICI Bank

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

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

Diversification Opportunities for State Trading and ICICI Bank

0.62

Correlation Coefficient

State Trading  ICICI Bank

Poor diversification

The 3 months correlation between State and ICICI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading 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 State Trading 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 The State Trading 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 State Trading i.e., State Trading and ICICI Bank go up and down completely randomly.

Pair Corralation between State Trading and ICICI Bank

Assuming the 90 days trading horizon The State Trading is expected to generate 3.27 times more return on investment than ICICI Bank. However, State Trading is 3.27 times more volatile than ICICI Bank Limited. It trades about 0.03 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about -0.02 per unit of risk. If you would invest  14,848  in The State Trading on October 23, 2024 and sell it today you would earn a total of  344.00  from holding The State Trading or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

The State Trading  vs.  ICICI Bank Limited

State Trading

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, State Trading may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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 State Trading and ICICI Bank

The main advantage of trading using opposite State Trading and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Trading 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 The State Trading 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.