Correlation Between Banco De and InRetail Peru

Can any of the company-specific risk be diversified away by investing in both Banco De and InRetail 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 Banco De and InRetail Peru 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 InRetail Peru Corp, you can compare the effects of market volatilities on Banco De and InRetail 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 Banco De with a short position of InRetail Peru. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and InRetail Peru.

Diversification Opportunities for Banco De and InRetail Peru

-0.47

Correlation Coefficient

Banco De  InRetail Peru

Very good diversification

The 3 months correlation between Banco and InRetail is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and InRetail Peru Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InRetail Peru Corp 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 InRetail Peru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InRetail Peru Corp has no effect on the direction of Banco De i.e., Banco De and InRetail Peru go up and down completely randomly.

Pair Corralation between Banco De and InRetail Peru

Assuming the 90 days trading horizon Banco de Credito is expected to generate 0.97 times more return on investment than InRetail Peru. However, Banco de Credito is 1.03 times less risky than InRetail Peru. It trades about 0.04 of its potential returns per unit of risk. InRetail Peru Corp is currently generating about -0.1 per unit of risk. If you would invest  400.00  in Banco de Credito on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Banco de Credito or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Banco de Credito  vs.  InRetail Peru Corp

Banco de Credito

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Credito are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Banco De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

InRetail Peru Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days InRetail Peru Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco De and InRetail Peru

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

The idea behind Banco de Credito and InRetail Peru Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.