Correlation Between International Business and Credicorp

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

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

Diversification Opportunities for International Business and Credicorp

0.0

Correlation Coefficient

International Business  Credicorp

Pay attention - limited upside

The 3 months correlation between International and Credicorp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and International Business 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 International Business Machines are associated (or correlated) with Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of International Business i.e., International Business and Credicorp go up and down completely randomly.

Pair Corralation between International Business and Credicorp

If you would invest  446,998  in International Business Machines on December 31, 2024 and sell it today you would earn a total of  54,658  from holding International Business Machines or generate 12.23% return on investment over 90 days.

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

International Business Machine  vs.  Credicorp

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, International Business showed solid returns over the last few months and may actually be approaching a breakup point.

Credicorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credicorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Credicorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Business and Credicorp

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

The idea behind International Business Machines and Credicorp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.