Correlation Between Credicorp and Danaher

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

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

Diversification Opportunities for Credicorp and Danaher

-0.7

Correlation Coefficient

Credicorp  Danaher

Excellent diversification

The 3 months correlation between Credicorp and Danaher is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher and Credicorp 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 Credicorp are associated (or correlated) with Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Credicorp i.e., Credicorp and Danaher go up and down completely randomly.

Pair Corralation between Credicorp and Danaher

Assuming the 90 days trading horizon Credicorp is expected to generate 0.95 times more return on investment than Danaher. However, Credicorp is 1.06 times less risky than Danaher. It trades about 0.09 of its potential returns per unit of risk. Danaher is currently generating about -0.08 per unit of risk. If you would invest  327,484  in Credicorp on September 25, 2024 and sell it today you would earn a total of  36,516  from holding Credicorp or generate 11.15% return on investment over 90 days.

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

Credicorp  vs.  Danaher

Credicorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Credicorp and Danaher

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

The idea behind Credicorp and Danaher 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..