Correlation Between SPBVL Peru and InRetail Peru

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

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

Diversification Opportunities for SPBVL Peru and InRetail Peru

-0.04

Correlation Coefficient

SPBVL Peru  InRetail Peru

Good diversification

The 3 months correlation between SPBVL and InRetail is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPBVL Peru General and InRetail Peru Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InRetail Peru Corp and SPBVL 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 SPBVL Peru General are associated (or correlated) with InRetail Peru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InRetail Peru Corp has no effect on the direction of SPBVL Peru i.e., SPBVL Peru and InRetail Peru go up and down completely randomly.

Pair Corralation between SPBVL Peru and InRetail Peru

Assuming the 90 days trading horizon SPBVL Peru General is expected to under-perform the InRetail Peru. In addition to that, SPBVL Peru is 1.09 times more volatile than InRetail Peru Corp. It trades about -0.15 of its total potential returns per unit of risk. InRetail Peru Corp is currently generating about -0.02 per unit of volatility. If you would invest  3,150  in InRetail Peru Corp on October 26, 2024 and sell it today you would lose (20.00) from holding InRetail Peru Corp or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SPBVL Peru General  vs.  InRetail Peru Corp

Pair Trading with SPBVL Peru and InRetail Peru

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

The idea behind SPBVL Peru General and InRetail Peru Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.