Correlation Between Merchants Bancorp and Icici Bank

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Can any of the company-specific risk be diversified away by investing in both Merchants 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 Merchants 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 Merchants Bancorp and Icici Bank, you can compare the effects of market volatilities on Merchants 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 Merchants Bancorp with a short position of Icici Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Icici Bank.

Diversification Opportunities for Merchants Bancorp and Icici Bank

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Merchants and Icici is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Icici Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icici Bank and Merchants 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 Merchants 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 has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Icici Bank go up and down completely randomly.

Pair Corralation between Merchants Bancorp and Icici Bank

Given the investment horizon of 90 days Merchants Bancorp is expected to under-perform the Icici Bank. In addition to that, Merchants Bancorp is 1.24 times more volatile than Icici Bank. It trades about -0.38 of its total potential returns per unit of risk. Icici Bank is currently generating about -0.15 per unit of volatility. If you would invest  2,184  in Icici Bank on July 2, 2022 and sell it today you would lose (113.00)  from holding Icici Bank or give up 5.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Merchants Bancorp  vs.  Icici Bank Ltd

 Performance (%) 
       Timeline  
Merchants Bancorp 
Merchants Performance
0 of 100
Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Merchants Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Merchants Price Channel

Icici Bank 
Icici Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Icici Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Icici Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Icici Price Channel

Merchants Bancorp and Icici Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merchants Bancorp and Icici Bank

The main advantage of trading using opposite Merchants Bancorp and Icici Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants 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.
Merchants Bancorp vs. Amazon Inc
The idea behind Merchants Bancorp and Icici Bank 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.
Icici Bank vs. Amazon Inc
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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