Correlation Between ECB Bancorp and ICICI Bank

Can any of the company-specific risk be diversified away by investing in both ECB Bancorp 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 ECB Bancorp and ICICI Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECB Bancorp and ICICI Bank Limited, you can compare the effects of market volatilities on ECB Bancorp 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 ECB Bancorp with a short position of ICICI Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and ICICI Bank.

Diversification Opportunities for ECB Bancorp and ICICI Bank

-0.72

Correlation Coefficient

ECB Bancorp  ICICI Bank

Pay attention - limited upside

The 3 months correlation between ECB and ICICI is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp 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 ECB Bancorp 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 ECB Bancorp 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 ECB Bancorp i.e., ECB Bancorp and ICICI Bank go up and down completely randomly.

Pair Corralation between ECB Bancorp and ICICI Bank

Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the ICICI Bank. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 1.17 times less risky than ICICI Bank. The stock trades about -0.04 of its potential returns per unit of risk. The ICICI Bank Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,606  in ICICI Bank Limited on March 13, 2024 and sell it today you would earn a total of  62.00  from holding ICICI Bank Limited or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ECB Bancorp  vs.  ICICI Bank Limited

ECB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, ECB Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ICICI Bank Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, ICICI Bank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ECB Bancorp and ICICI Bank

The main advantage of trading using opposite ECB Bancorp and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp 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 ECB Bancorp 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.