Correlation Between Intercorp Financial and BBVA Banco

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

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

Diversification Opportunities for Intercorp Financial and BBVA Banco

0.83

Correlation Coefficient

Intercorp Financial  BBVA Banco

Very poor diversification

The 3 months correlation between Intercorp and BBVA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Intercorp Financial Services and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Intercorp Financial 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 Intercorp Financial Services are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Intercorp Financial i.e., Intercorp Financial and BBVA Banco go up and down completely randomly.

Pair Corralation between Intercorp Financial and BBVA Banco

Considering the 90-day investment horizon Intercorp Financial is expected to generate 6.58 times less return on investment than BBVA Banco. But when comparing it to its historical volatility, Intercorp Financial Services is 3.71 times less risky than BBVA Banco. It trades about 0.15 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,159  in BBVA Banco Frances on September 22, 2024 and sell it today you would earn a total of  671.00  from holding BBVA Banco Frances or generate 57.89% return on investment over 90 days.

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

Intercorp Financial Services  vs.  BBVA Banco Frances

Intercorp Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intercorp Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Intercorp Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

BBVA Banco Frances

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intercorp Financial and BBVA Banco

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

The idea behind Intercorp Financial Services and BBVA Banco Frances 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.