Correlation Between ICICI Lombard and JBM Auto

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Can any of the company-specific risk be diversified away by investing in both ICICI Lombard and JBM 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 Lombard and JBM Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICICI Lombard General and JBM Auto Limited, you can compare the effects of market volatilities on ICICI Lombard and JBM 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 Lombard with a short position of JBM Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Lombard and JBM Auto.

Diversification Opportunities for ICICI Lombard and JBM Auto

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between ICICI and JBM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Lombard General and JBM Auto Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBM Auto Limited and ICICI Lombard 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 Lombard General are associated (or correlated) with JBM Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBM Auto Limited has no effect on the direction of ICICI Lombard i.e., ICICI Lombard and JBM Auto go up and down completely randomly.

Pair Corralation between ICICI Lombard and JBM Auto

Assuming the 90 days trading horizon ICICI Lombard General is expected to generate 0.23 times more return on investment than JBM Auto. However, ICICI Lombard General is 4.32 times less risky than JBM Auto. It trades about -0.18 of its potential returns per unit of risk. JBM Auto Limited is currently generating about -0.08 per unit of risk. If you would invest  177,870  in ICICI Lombard General on November 28, 2024 and sell it today you would lose (9,095) from holding ICICI Lombard General or give up 5.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

ICICI Lombard General  vs.  JBM Auto Limited

 Performance 
       Timeline  
ICICI Lombard General 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ICICI Lombard General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.
JBM Auto Limited 

Risk-Adjusted Performance

Very Weak

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

ICICI Lombard and JBM Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ICICI Lombard and JBM Auto

The main advantage of trading using opposite ICICI Lombard and JBM Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Lombard position performs unexpectedly, JBM 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 JBM Auto will offset losses from the drop in JBM Auto's long position.
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The idea behind ICICI Lombard General and JBM Auto 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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