Correlation Between Banco De and Intercorp Financial

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

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

Diversification Opportunities for Banco De and Intercorp Financial

0.94

Correlation Coefficient

Banco De  Intercorp Financial

Almost no diversification

The 3 months correlation between Banco and Intercorp is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Intercorp Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercorp Financial and Banco De 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 Banco De Chile are associated (or correlated) with Intercorp Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercorp Financial has no effect on the direction of Banco De i.e., Banco De and Intercorp Financial go up and down completely randomly.

Pair Corralation between Banco De and Intercorp Financial

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.9 times more return on investment than Intercorp Financial. However, Banco De Chile is 1.11 times less risky than Intercorp Financial. It trades about 0.36 of its potential returns per unit of risk. Intercorp Financial Services is currently generating about 0.18 per unit of risk. If you would invest  2,088  in Banco De Chile on December 28, 2024 and sell it today you would earn a total of  608.00  from holding Banco De Chile or generate 29.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banco De Chile  vs.  Intercorp Financial Services

Banco De Chile

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Intercorp Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intercorp Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Intercorp Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco De and Intercorp Financial

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

The idea behind Banco De Chile and Intercorp Financial Services 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.