Correlation Between Corporacion Aceros and Scotiabank Peru

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

By analyzing existing cross correlation between Corporacion Aceros Arequipa and Scotiabank Peru SAA, you can compare the effects of market volatilities on Corporacion Aceros and Scotiabank Peru 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 Corporacion Aceros with a short position of Scotiabank Peru. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporacion Aceros and Scotiabank Peru.

Diversification Opportunities for Corporacion Aceros and Scotiabank Peru

0.35

Correlation Coefficient

Corporacion Aceros  Scotiabank Peru

Weak diversification

The 3 months correlation between Corporacion and Scotiabank is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion Aceros Arequipa and Scotiabank Peru SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotiabank Peru SAA and Corporacion Aceros 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 Corporacion Aceros Arequipa are associated (or correlated) with Scotiabank Peru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotiabank Peru SAA has no effect on the direction of Corporacion Aceros i.e., Corporacion Aceros and Scotiabank Peru go up and down completely randomly.

Pair Corralation between Corporacion Aceros and Scotiabank Peru

Assuming the 90 days trading horizon Corporacion Aceros Arequipa is expected to generate 0.69 times more return on investment than Scotiabank Peru. However, Corporacion Aceros Arequipa is 1.46 times less risky than Scotiabank Peru. It trades about -0.03 of its potential returns per unit of risk. Scotiabank Peru SAA is currently generating about -0.1 per unit of risk. If you would invest  142.00  in Corporacion Aceros Arequipa on October 11, 2024 and sell it today you would lose (39.00) from holding Corporacion Aceros Arequipa or give up 27.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	27.35%
Values	Daily Returns

Corporacion Aceros Arequipa  vs.  Scotiabank Peru SAA

Corporacion Aceros

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Corporacion Aceros Arequipa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Corporacion Aceros is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Scotiabank Peru SAA

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Scotiabank Peru SAA are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Scotiabank Peru exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Corporacion Aceros and Scotiabank Peru

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

The idea behind Corporacion Aceros Arequipa and Scotiabank Peru SAA 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.