Correlation Between Steelcast and ICICI Bank

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

Diversification Opportunities for Steelcast and ICICI Bank

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Steelcast and ICICI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited 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 Steelcast 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 Steelcast Limited 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 Steelcast i.e., Steelcast and ICICI Bank go up and down completely randomly.

Pair Corralation between Steelcast and ICICI Bank

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 2.11 times more return on investment than ICICI Bank. However, Steelcast is 2.11 times more volatile than ICICI Bank Limited. It trades about 0.05 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.04 per unit of risk. If you would invest  75,818  in Steelcast Limited on August 29, 2024 and sell it today you would earn a total of  1,627  from holding Steelcast Limited or generate 2.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Steelcast Limited  vs.  ICICI Bank Limited

 Performance 
       Timeline  
Steelcast Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.
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 unfluctuating basic indicators, ICICI Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Steelcast and ICICI Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steelcast and ICICI Bank

The main advantage of trading using opposite Steelcast and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steelcast 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 Steelcast Limited 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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