Correlation Between Banco De and Salfacorp

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

By analyzing existing cross correlation between Banco de Credito and Salfacorp, you can compare the effects of market volatilities on Banco De and Salfacorp 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 Salfacorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Salfacorp.

Diversification Opportunities for Banco De and Salfacorp

0.95

Correlation Coefficient

Banco De  Salfacorp

Almost no diversification

The 3 months correlation between Banco and Salfacorp is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp 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 Credito are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Banco De i.e., Banco De and Salfacorp go up and down completely randomly.

Pair Corralation between Banco De and Salfacorp

Assuming the 90 days trading horizon Banco De is expected to generate 1.05 times less return on investment than Salfacorp. But when comparing it to its historical volatility, Banco de Credito is 1.02 times less risky than Salfacorp. It trades about 0.22 of its potential returns per unit of risk. Salfacorp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  55,646  in Salfacorp on December 3, 2024 and sell it today you would earn a total of  8,354  from holding Salfacorp or generate 15.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Banco de Credito  vs.  Salfacorp

Banco de Credito

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Credito are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Banco De displayed solid returns over the last few months and may actually be approaching a breakup point.

Salfacorp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco De and Salfacorp

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

The idea behind Banco de Credito and Salfacorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.