Correlation Between InRetail Peru and Rimac Seguros

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

By analyzing existing cross correlation between InRetail Peru Corp and Rimac Seguros y, you can compare the effects of market volatilities on InRetail Peru and Rimac Seguros 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 InRetail Peru with a short position of Rimac Seguros. Check out your portfolio center. Please also check ongoing floating volatility patterns of InRetail Peru and Rimac Seguros.

Diversification Opportunities for InRetail Peru and Rimac Seguros

0.39

Correlation Coefficient

InRetail Peru  Rimac Seguros

Weak diversification

The 3 months correlation between InRetail and Rimac is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding InRetail Peru Corp and Rimac Seguros y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimac Seguros y and InRetail Peru 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 InRetail Peru Corp are associated (or correlated) with Rimac Seguros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimac Seguros y has no effect on the direction of InRetail Peru i.e., InRetail Peru and Rimac Seguros go up and down completely randomly.

Pair Corralation between InRetail Peru and Rimac Seguros

Assuming the 90 days trading horizon InRetail Peru is expected to generate 2.25 times less return on investment than Rimac Seguros. But when comparing it to its historical volatility, InRetail Peru Corp is 1.85 times less risky than Rimac Seguros. It trades about 0.12 of its potential returns per unit of risk. Rimac Seguros y is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Rimac Seguros y on October 12, 2024 and sell it today you would earn a total of  5.00  from holding Rimac Seguros y or generate 5.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	43.33%
Values	Daily Returns

InRetail Peru Corp  vs.  Rimac Seguros y

InRetail Peru Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InRetail Peru Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, InRetail Peru is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Rimac Seguros y

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Rimac Seguros y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating technical and fundamental indicators, Rimac Seguros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InRetail Peru and Rimac Seguros

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

The idea behind InRetail Peru Corp and Rimac Seguros y 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.