Correlation Between Wells Fargo and Credicorp

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

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

Diversification Opportunities for Wells Fargo and Credicorp

0.13

Correlation Coefficient

Wells Fargo  Credicorp

Average diversification

The 3 months correlation between Wells and Credicorp is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Credicorp go up and down completely randomly.

Pair Corralation between Wells Fargo and Credicorp

Considering the 90-day investment horizon Wells Fargo is expected to generate 1.51 times less return on investment than Credicorp. In addition to that, Wells Fargo is 1.31 times more volatile than Credicorp. It trades about 0.04 of its total potential returns per unit of risk. Credicorp is currently generating about 0.07 per unit of volatility. If you would invest  18,018  in Credicorp on December 28, 2024 and sell it today you would earn a total of  1,044  from holding Credicorp or generate 5.79% return on investment over 90 days.

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

Wells Fargo  vs.  Credicorp

Wells Fargo

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wells Fargo is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Credicorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wells Fargo and Credicorp

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

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.