Correlation Between Credicorp and Shinhan Financial

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

By analyzing existing cross correlation between Credicorp and Shinhan Financial Group, you can compare the effects of market volatilities on Credicorp and Shinhan Financial 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 Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credicorp and Shinhan Financial.

Diversification Opportunities for Credicorp and Shinhan Financial

-0.31

Correlation Coefficient

Credicorp  Shinhan Financial

Very good diversification

The 3 months correlation between Credicorp and Shinhan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial 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 Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of Credicorp i.e., Credicorp and Shinhan Financial go up and down completely randomly.

Pair Corralation between Credicorp and Shinhan Financial

Considering the 90-day investment horizon Credicorp is expected to generate 0.81 times more return on investment than Shinhan Financial. However, Credicorp is 1.23 times less risky than Shinhan Financial. It trades about -0.24 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.39 per unit of risk. If you would invest  19,732  in Credicorp on September 23, 2024 and sell it today you would lose (1,519) from holding Credicorp or give up 7.7% of portfolio value over 90 days.

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

Credicorp  vs.  Shinhan Financial Group

Credicorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 3 (%) 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.

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group 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 technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Credicorp and Shinhan Financial

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

The idea behind Credicorp and Shinhan Financial Group 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.

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 the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.