Correlation Between VersaBank and ICICI Bank

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

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

Diversification Opportunities for VersaBank and ICICI Bank

-0.58

Correlation Coefficient

VersaBank  ICICI Bank

Excellent diversification

The 3 months correlation between VersaBank and ICICI is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank 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 VersaBank 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 VersaBank 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 VersaBank i.e., VersaBank and ICICI Bank go up and down completely randomly.

Pair Corralation between VersaBank and ICICI Bank

Given the investment horizon of 90 days VersaBank is expected to under-perform the ICICI Bank. In addition to that, VersaBank is 2.0 times more volatile than ICICI Bank Limited. It trades about -0.19 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.27 per unit of volatility. If you would invest  2,809  in ICICI Bank Limited on January 8, 2025 and sell it today you would earn a total of  207.00  from holding ICICI Bank Limited or generate 7.37% return on investment over 90 days.

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

VersaBank  vs.  ICICI Bank Limited

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ICICI Bank Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 3 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VersaBank and ICICI Bank

The main advantage of trading using opposite VersaBank and ICICI Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank 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 VersaBank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.