Correlation Between Banco De and Sociedad Qumica

Can any of the company-specific risk be diversified away by investing in both Banco De and Sociedad Qumica 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 Sociedad Qumica 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 Sociedad Qumica y, you can compare the effects of market volatilities on Banco De and Sociedad Qumica 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 Sociedad Qumica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Sociedad Qumica.

Diversification Opportunities for Banco De and Sociedad Qumica

0.07

Correlation Coefficient

Banco De  Sociedad Qumica

Significant diversification

The 3 months correlation between Banco and Sociedad is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of Banco De i.e., Banco De and Sociedad Qumica go up and down completely randomly.

Pair Corralation between Banco De and Sociedad Qumica

Assuming the 90 days trading horizon Banco de Credito is expected to under-perform the Sociedad Qumica. But the stock apears to be less risky and, when comparing its historical volatility, Banco de Credito is 1.45 times less risky than Sociedad Qumica. The stock trades about 0.0 of its potential returns per unit of risk. The Sociedad Qumica y is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,367,300  in Sociedad Qumica y on September 13, 2024 and sell it today you would earn a total of  335,400  from holding Sociedad Qumica y or generate 9.96% return on investment over 90 days.

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

Banco de Credito  vs.  Sociedad Qumica y

Banco de Credito

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco de Credito has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Banco De is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sociedad Qumica y

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Banco De and Sociedad Qumica

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

The idea behind Banco de Credito and Sociedad Qumica y 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.