Correlation Between ICICI Bank and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ICICI Bank and Dow Jones 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 ICICI Bank and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICICI Bank Limited and Dow Jones Industrial, you can compare the effects of market volatilities on ICICI Bank and Dow Jones 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 ICICI Bank with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and Dow Jones.
Diversification Opportunities for ICICI Bank and Dow Jones
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ICICI and Dow is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and ICICI Bank 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 ICICI Bank Limited are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of ICICI Bank i.e., ICICI Bank and Dow Jones go up and down completely randomly.
Pair Corralation between ICICI Bank and Dow Jones
Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 2.38 times more return on investment than Dow Jones. However, ICICI Bank is 2.38 times more volatile than Dow Jones Industrial. It trades about 0.05 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 2,101 in ICICI Bank Limited on August 26, 2024 and sell it today you would earn a total of 819.00 from holding ICICI Bank Limited or generate 38.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
ICICI Bank Limited vs. Dow Jones Industrial
Performance |
| Timeline |
ICICI Bank and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ICICI Bank Limited
Pair trading matchups for ICICI Bank
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ICICI Bank and Dow Jones
The main advantage of trading using opposite ICICI Bank and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| ICICI Bank vs. HDFC Bank Limited | ICICI Bank vs. PT Bank Central | ICICI Bank vs. DBS Group Holdings | ICICI Bank vs. State Bank of |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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