Correlation Between Linedata Services and Credicorp

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

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

Diversification Opportunities for Linedata Services and Credicorp

-0.14

Correlation Coefficient

Linedata Services  Credicorp

Good diversification

The 3 months correlation between Linedata and Credicorp is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Linedata Services 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 Linedata Services SA 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 Linedata Services i.e., Linedata Services and Credicorp go up and down completely randomly.

Pair Corralation between Linedata Services and Credicorp

Assuming the 90 days trading horizon Linedata Services is expected to generate 1.15 times less return on investment than Credicorp. In addition to that, Linedata Services is 1.25 times more volatile than Credicorp. It trades about 0.06 of its total potential returns per unit of risk. Credicorp is currently generating about 0.08 per unit of volatility. If you would invest  13,768  in Credicorp on October 25, 2024 and sell it today you would earn a total of  3,732  from holding Credicorp or generate 27.11% return on investment over 90 days.

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

Linedata Services SA  vs.  Credicorp

Linedata Services

Risk-Adjusted Performance

0 of 100

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.

Credicorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 1 (%) 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.

Pair Trading with Linedata Services and Credicorp

The main advantage of trading using opposite Linedata Services and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linedata Services 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 Linedata Services SA 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.