Correlation Between Credicorp and Affinity Bancshares

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

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

Diversification Opportunities for Credicorp and Affinity Bancshares

-0.15

Correlation Coefficient

Credicorp  Affinity Bancshares

Good diversification

The 3 months correlation between Credicorp and Affinity is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Credicorp 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 Credicorp are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Credicorp i.e., Credicorp and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Credicorp and Affinity Bancshares

Considering the 90-day investment horizon Credicorp is expected to generate 0.49 times more return on investment than Affinity Bancshares. However, Credicorp is 2.03 times less risky than Affinity Bancshares. It trades about 0.06 of its potential returns per unit of risk. Affinity Bancshares is currently generating about -0.06 per unit of risk. If you would invest  18,018  in Credicorp on December 30, 2024 and sell it today you would earn a total of  798.00  from holding Credicorp or generate 4.43% return on investment over 90 days.

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

Credicorp  vs.  Affinity Bancshares

Credicorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Credicorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Affinity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Credicorp and Affinity Bancshares

The main advantage of trading using opposite Credicorp and Affinity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credicorp position performs unexpectedly, Affinity Bancshares 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 Affinity Bancshares will offset losses from the drop in Affinity Bancshares' long position.

The idea behind Credicorp and Affinity Bancshares 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.