Correlation Between Village Bank and Credicorp

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

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

Diversification Opportunities for Village Bank and Credicorp

0.32

Correlation Coefficient

Village Bank  Credicorp

Weak diversification

The 3 months correlation between Village and Credicorp is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Village Bank 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 Village Bank and 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 Village Bank i.e., Village Bank and Credicorp go up and down completely randomly.

Pair Corralation between Village Bank and Credicorp

Given the investment horizon of 90 days Village Bank and is expected to generate 44.03 times more return on investment than Credicorp. However, Village Bank is 44.03 times more volatile than Credicorp. It trades about 0.07 of its potential returns per unit of risk. Credicorp is currently generating about 0.04 per unit of risk. If you would invest  5,500  in Village Bank and on October 4, 2024 and sell it today you would earn a total of  2,285  from holding Village Bank and or generate 41.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.23%
Values	Daily Returns

Village Bank and  vs.  Credicorp

Village Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Credicorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credicorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Credicorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Village Bank and Credicorp

The main advantage of trading using opposite Village Bank and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Bank 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 Village Bank and 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.