Correlation Between Credicorp and Linedata Services

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

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

Diversification Opportunities for Credicorp and Linedata Services

0.43

Correlation Coefficient

Credicorp  Linedata Services

Very weak diversification

The 3 months correlation between Credicorp and Linedata is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata Services and Credicorp 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 Credicorp are associated (or correlated) with Linedata Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linedata Services has no effect on the direction of Credicorp i.e., Credicorp and Linedata Services go up and down completely randomly.

Pair Corralation between Credicorp and Linedata Services

Assuming the 90 days horizon Credicorp is expected to generate 0.91 times more return on investment than Linedata Services. However, Credicorp is 1.09 times less risky than Linedata Services. It trades about 0.04 of its potential returns per unit of risk. Linedata Services SA is currently generating about -0.02 per unit of risk. If you would invest  17,300  in Credicorp on December 24, 2024 and sell it today you would earn a total of  500.00  from holding Credicorp or generate 2.89% return on investment over 90 days.

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

Credicorp  vs.  Linedata Services SA

Credicorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Credicorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Linedata Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linedata Services SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Credicorp and Linedata Services

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

The idea behind Credicorp and Linedata Services SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.