Correlation Between Loews Corp and ICICI Bank

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

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

Diversification Opportunities for Loews Corp and ICICI Bank

0.61

Correlation Coefficient

Loews Corp  ICICI Bank

Poor diversification

The 3 months correlation between Loews and ICICI is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp 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 Loews Corp 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 Loews Corp 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 Loews Corp i.e., Loews Corp and ICICI Bank go up and down completely randomly.

Pair Corralation between Loews Corp and ICICI Bank

Taking into account the 90-day investment horizon Loews Corp is expected to under-perform the ICICI Bank. But the stock apears to be less risky and, when comparing its historical volatility, Loews Corp is 1.27 times less risky than ICICI Bank. The stock trades about -0.03 of its potential returns per unit of risk. The ICICI Bank Limited is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,575  in ICICI Bank Limited on February 2, 2024 and sell it today you would earn a total of  185.00  from holding ICICI Bank Limited or generate 7.18% return on investment over 90 days.

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

Loews Corp  vs.  ICICI Bank Limited

Loews Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Loews Corp is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

ICICI Bank Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, ICICI Bank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Loews Corp and ICICI Bank

The main advantage of trading using opposite Loews Corp and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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 Loews Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.