Correlation Between Truist Financial and Credicorp

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

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

Diversification Opportunities for Truist Financial and Credicorp

0.7

Correlation Coefficient

Truist Financial  Credicorp

Poor diversification

The 3 months correlation between Truist and Credicorp is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Truist Financial 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 Truist Financial are associated (or correlated) with Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of Truist Financial i.e., Truist Financial and Credicorp go up and down completely randomly.

Pair Corralation between Truist Financial and Credicorp

Assuming the 90 days horizon Truist Financial is expected to generate 1.19 times more return on investment than Credicorp. However, Truist Financial is 1.19 times more volatile than Credicorp. It trades about 0.17 of its potential returns per unit of risk. Credicorp is currently generating about 0.04 per unit of risk. If you would invest  4,193  in Truist Financial on October 25, 2024 and sell it today you would earn a total of  295.00  from holding Truist Financial or generate 7.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Truist Financial  vs.  Credicorp

Truist Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Truist Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Credicorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Credicorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Truist Financial and Credicorp

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

The idea behind Truist Financial and Credicorp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.