Correlation Between Tata Communications and ICICI Bank
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By analyzing existing cross correlation between Tata Communications Limited and ICICI Bank Limited, you can compare the effects of market volatilities on Tata Communications 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 Tata Communications with a short position of ICICI Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Communications and ICICI Bank.
Diversification Opportunities for Tata Communications and ICICI Bank
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tata and ICICI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tata Communications 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 Tata Communications 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 Tata Communications 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 Tata Communications i.e., Tata Communications and ICICI Bank go up and down completely randomly.
Pair Corralation between Tata Communications and ICICI Bank
Assuming the 90 days trading horizon Tata Communications is expected to generate 1.1 times less return on investment than ICICI Bank. In addition to that, Tata Communications is 1.55 times more volatile than ICICI Bank Limited. It trades about 0.05 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.08 per unit of volatility. If you would invest 93,117 in ICICI Bank Limited on August 27, 2024 and sell it today you would earn a total of 34,688 from holding ICICI Bank Limited or generate 37.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Communications Limited vs. ICICI Bank Limited
Performance |
| Timeline |
| Tata Communications |
| ICICI Bank Limited |
Tata Communications and ICICI Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Communications and ICICI Bank
The main advantage of trading using opposite Tata Communications and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Communications 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 Tata Communications 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.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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