Correlation Between Varta AG and ICICI Bank

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

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

Diversification Opportunities for Varta AG and ICICI Bank

-0.76

Correlation Coefficient

Varta AG  ICICI Bank

Pay attention - limited upside

The 3 months correlation between Varta and ICICI is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG 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 Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and ICICI Bank go up and down completely randomly.

Pair Corralation between Varta AG and ICICI Bank

Assuming the 90 days trading horizon Varta AG is expected to under-perform the ICICI Bank. In addition to that, Varta AG is 4.54 times more volatile than ICICI Bank Limited. It trades about -0.29 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about -0.22 per unit of volatility. If you would invest  2,960  in ICICI Bank Limited on October 10, 2024 and sell it today you would lose (120.00) from holding ICICI Bank Limited or give up 4.05% of portfolio value over 90 days.

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

Varta AG  vs.  ICICI Bank Limited

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 nearly stable fundamental drivers, ICICI Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and ICICI Bank

The main advantage of trading using opposite Varta AG and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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 Varta AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.