Correlation Between ICICI Bank and Rico Auto

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Can any of the company-specific risk be diversified away by investing in both ICICI Bank and Rico Auto 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 Rico Auto 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 Rico Auto Industries, you can compare the effects of market volatilities on ICICI Bank and Rico Auto 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 Rico Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and Rico Auto.

Diversification Opportunities for ICICI Bank and Rico Auto

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between ICICI and Rico is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries 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 Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of ICICI Bank i.e., ICICI Bank and Rico Auto go up and down completely randomly.

Pair Corralation between ICICI Bank and Rico Auto

Assuming the 90 days trading horizon ICICI Bank Limited is expected to generate 0.56 times more return on investment than Rico Auto. However, ICICI Bank Limited is 1.77 times less risky than Rico Auto. It trades about 0.44 of its potential returns per unit of risk. Rico Auto Industries is currently generating about 0.22 per unit of risk. If you would invest  125,225  in ICICI Bank Limited on September 17, 2024 and sell it today you would earn a total of  9,265  from holding ICICI Bank Limited or generate 7.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

ICICI Bank Limited  vs.  Rico Auto Industries

 Performance 
       Timeline  
ICICI Bank Limited 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, ICICI Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Rico Auto Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ICICI Bank and Rico Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ICICI Bank and Rico Auto

The main advantage of trading using opposite ICICI Bank and Rico Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, Rico Auto 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 Rico Auto will offset losses from the drop in Rico Auto's long position.
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The idea behind ICICI Bank Limited and Rico Auto Industries 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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