Correlation Between Stag Industrial and ICICI Bank

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

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

Diversification Opportunities for Stag Industrial and ICICI Bank

-0.19

Correlation Coefficient

Stag Industrial  ICICI Bank

Good diversification

The 3 months correlation between Stag and ICICI is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial 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 Stag Industrial 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 Stag Industrial 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 Stag Industrial i.e., Stag Industrial and ICICI Bank go up and down completely randomly.

Pair Corralation between Stag Industrial and ICICI Bank

Assuming the 90 days trading horizon Stag Industrial is expected to under-perform the ICICI Bank. But the stock apears to be less risky and, when comparing its historical volatility, Stag Industrial is 1.11 times less risky than ICICI Bank. The stock trades about -0.3 of its potential returns per unit of risk. The ICICI Bank Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,940  in ICICI Bank Limited on October 11, 2024 and sell it today you would lose (40.00) from holding ICICI Bank Limited or give up 1.36% of portfolio value over 90 days.

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

Stag Industrial  vs.  ICICI Bank Limited

Stag Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stag Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stag Industrial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ICICI Bank Limited

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, ICICI Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stag Industrial and ICICI Bank

The main advantage of trading using opposite Stag Industrial and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stag Industrial 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 Stag Industrial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.