Correlation Between Scotiabank Peru and Luz Del

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

By analyzing existing cross correlation between Scotiabank Peru SAA and Luz del Sur, you can compare the effects of market volatilities on Scotiabank Peru and Luz Del 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 Scotiabank Peru with a short position of Luz Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotiabank Peru and Luz Del.

Diversification Opportunities for Scotiabank Peru and Luz Del

0.0

Correlation Coefficient

Scotiabank Peru  Luz Del

Pay attention - limited upside

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

Pair Corralation between Scotiabank Peru and Luz Del

Assuming the 90 days trading horizon Scotiabank Peru SAA is expected to generate 3.0 times more return on investment than Luz Del. However, Scotiabank Peru is 3.0 times more volatile than Luz del Sur. It trades about 0.22 of its potential returns per unit of risk. Luz del Sur is currently generating about -0.08 per unit of risk. If you would invest  1,030  in Scotiabank Peru SAA on December 26, 2024 and sell it today you would earn a total of  170.00  from holding Scotiabank Peru SAA or generate 16.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	31.67%
Values	Daily Returns

Scotiabank Peru SAA  vs.  Luz del Sur

Scotiabank Peru SAA

Risk-Adjusted Performance

Solid

Over the last 90 days Scotiabank Peru SAA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Scotiabank Peru exhibited solid returns over the last few months and may actually be approaching a breakup point.

Luz del Sur

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luz del Sur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Scotiabank Peru and Luz Del

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

The idea behind Scotiabank Peru SAA and Luz del Sur 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.