Correlation Between InRetail Peru and Scotiabank Peru

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

Diversification Opportunities for InRetail Peru and Scotiabank Peru

-0.29

Correlation Coefficient

InRetail Peru  Scotiabank Peru

Very good diversification

The 3 months correlation between InRetail and Scotiabank is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding InRetail Peru Corp and Scotiabank Peru SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotiabank Peru SAA 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 Scotiabank Peru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotiabank Peru SAA has no effect on the direction of InRetail Peru i.e., InRetail Peru and Scotiabank Peru go up and down completely randomly.

Pair Corralation between InRetail Peru and Scotiabank Peru

Assuming the 90 days trading horizon InRetail Peru is expected to generate 16.86 times less return on investment than Scotiabank Peru. But when comparing it to its historical volatility, InRetail Peru Corp is 3.96 times less risky than Scotiabank Peru. It trades about 0.12 of its potential returns per unit of risk. Scotiabank Peru SAA is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  950.00  in Scotiabank Peru SAA on October 10, 2024 and sell it today you would earn a total of  200.00  from holding Scotiabank Peru SAA or generate 21.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

InRetail Peru Corp  vs.  Scotiabank Peru SAA

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Scotiabank Peru SAA

Risk-Adjusted Performance

41 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Scotiabank Peru SAA are ranked lower than 41 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Scotiabank Peru exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InRetail Peru and Scotiabank Peru

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

The idea behind InRetail Peru Corp and Scotiabank Peru SAA 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.