Correlation Between Southern California and Credicorp

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Can any of the company-specific risk be diversified away by investing in both Southern California 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 Southern California and Credicorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern California Bancorp and Credicorp, you can compare the effects of market volatilities on Southern California 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 Southern California with a short position of Credicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern California and Credicorp.

Diversification Opportunities for Southern California and Credicorp

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Southern and Credicorp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southern California Bancorp and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Southern California 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 Southern California Bancorp 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 Southern California i.e., Southern California and Credicorp go up and down completely randomly.

Pair Corralation between Southern California and Credicorp

Given the investment horizon of 90 days Southern California Bancorp is expected to generate 1.12 times more return on investment than Credicorp. However, Southern California is 1.12 times more volatile than Credicorp. It trades about 0.15 of its potential returns per unit of risk. Credicorp is currently generating about 0.12 per unit of risk. If you would invest  1,294  in Southern California Bancorp on June 22, 2024 and sell it today you would earn a total of  199.00  from holding Southern California Bancorp or generate 15.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Southern California Bancorp  vs.  Credicorp

 Performance 
       Timeline  
Southern California 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Southern California disclosed solid returns over the last few months and may actually be approaching a breakup point.
Credicorp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 9 (%) 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 October 2024.

Southern California and Credicorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southern California and Credicorp

The main advantage of trading using opposite Southern California and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern California 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 Southern California Bancorp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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