Correlation Between Credicorp and Grupo Profuturo

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

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

Diversification Opportunities for Credicorp and Grupo Profuturo

0.34

Correlation Coefficient

Credicorp  Grupo Profuturo

Weak diversification

The 3 months correlation between Credicorp and Grupo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Grupo Profuturo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Profuturo SAB 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 Grupo Profuturo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Profuturo SAB has no effect on the direction of Credicorp i.e., Credicorp and Grupo Profuturo go up and down completely randomly.

Pair Corralation between Credicorp and Grupo Profuturo

Assuming the 90 days trading horizon Credicorp is expected to generate 1.85 times more return on investment than Grupo Profuturo. However, Credicorp is 1.85 times more volatile than Grupo Profuturo SAB. It trades about 0.09 of its potential returns per unit of risk. Grupo Profuturo SAB is currently generating about 0.06 per unit of risk. If you would invest  327,484  in Credicorp on September 24, 2024 and sell it today you would earn a total of  36,516  from holding Credicorp or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Credicorp  vs.  Grupo Profuturo SAB

Credicorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grupo Profuturo SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Profuturo SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grupo Profuturo is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Credicorp and Grupo Profuturo

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

The idea behind Credicorp and Grupo Profuturo SAB 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.