Correlation Between Credicorp and TotalEnergies

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

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

Diversification Opportunities for Credicorp and TotalEnergies

-0.43

Correlation Coefficient

Credicorp  TotalEnergies

Very good diversification

The 3 months correlation between Credicorp and TotalEnergies is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Credicorp i.e., Credicorp and TotalEnergies go up and down completely randomly.

Pair Corralation between Credicorp and TotalEnergies

Assuming the 90 days trading horizon Credicorp is expected to generate 0.28 times more return on investment than TotalEnergies. However, Credicorp is 3.52 times less risky than TotalEnergies. It trades about -0.31 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.23 per unit of risk. If you would invest  381,039  in Credicorp on September 23, 2024 and sell it today you would lose (17,039) from holding Credicorp or give up 4.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Credicorp  vs.  TotalEnergies SE

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.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Credicorp and TotalEnergies

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

The idea behind Credicorp and TotalEnergies SE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.