Correlation Between Tata Investment and ICICI Lombard

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

Diversification Opportunities for Tata Investment and ICICI Lombard

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Tata and ICICI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and ICICI Lombard General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Lombard General and Tata Investment 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 Investment are associated (or correlated) with ICICI Lombard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Lombard General has no effect on the direction of Tata Investment i.e., Tata Investment and ICICI Lombard go up and down completely randomly.

Pair Corralation between Tata Investment and ICICI Lombard

Assuming the 90 days trading horizon Tata Investment is expected to generate 2.02 times more return on investment than ICICI Lombard. However, Tata Investment is 2.02 times more volatile than ICICI Lombard General. It trades about 0.09 of its potential returns per unit of risk. ICICI Lombard General is currently generating about 0.07 per unit of risk. If you would invest  216,196  in Tata Investment on August 31, 2024 and sell it today you would earn a total of  451,244  from holding Tata Investment or generate 208.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Tata Investment  vs.  ICICI Lombard General

 Performance 
       Timeline  
Tata Investment 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
ICICI Lombard General 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ICICI Lombard General has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tata Investment and ICICI Lombard Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tata Investment and ICICI Lombard

The main advantage of trading using opposite Tata Investment and ICICI Lombard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Investment position performs unexpectedly, ICICI Lombard 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 Lombard will offset losses from the drop in ICICI Lombard's long position.
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The idea behind Tata Investment and ICICI Lombard General 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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