Correlation Between ICICI Bank and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both ICICI Bank and HDFC 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 ICICI Bank and HDFC Bank 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 HDFC Bank Limited, you can compare the effects of market volatilities on ICICI Bank and HDFC 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 ICICI Bank with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and HDFC Bank.
Diversification Opportunities for ICICI Bank and HDFC Bank
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ICICI and HDFC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited 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 HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of ICICI Bank i.e., ICICI Bank and HDFC Bank go up and down completely randomly.
Pair Corralation between ICICI Bank and HDFC Bank
Considering the 90-day investment horizon ICICI Bank is expected to generate 5.55 times less return on investment than HDFC Bank. But when comparing it to its historical volatility, ICICI Bank Limited is 1.4 times less risky than HDFC Bank. It trades about 0.05 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,453 in HDFC Bank Limited on January 26, 2024 and sell it today you would earn a total of 373.00 from holding HDFC Bank Limited or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICICI Bank Limited vs. HDFC Bank Limited
Performance |
| Timeline |
| ICICI Bank Limited |
| HDFC Bank Limited |
ICICI Bank and HDFC Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICICI Bank and HDFC Bank
The main advantage of trading using opposite ICICI Bank and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, HDFC 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 HDFC Bank will offset losses from the drop in HDFC Bank's long position.| ICICI Bank vs. US Bancorp | ICICI Bank vs. US Bancorp | ICICI Bank vs. KB Financial Group | ICICI Bank vs. Itau Unibanco Banco |
| HDFC Bank vs. US Bancorp | HDFC Bank vs. Banco Santander Brasil | HDFC Bank vs. Shinhan Financial Group | HDFC Bank vs. First Bancorp |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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