Correlation Between Credicorp and Walmart

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

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

Diversification Opportunities for Credicorp and Walmart

0.89

Correlation Coefficient

Credicorp  Walmart

Very poor diversification

The 3 months correlation between Credicorp and Walmart is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Credicorp i.e., Credicorp and Walmart go up and down completely randomly.

Pair Corralation between Credicorp and Walmart

Assuming the 90 days trading horizon Credicorp is expected to generate 1.12 times less return on investment than Walmart. In addition to that, Credicorp is 2.33 times more volatile than Walmart. It trades about 0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.22 per unit of volatility. If you would invest  88,542  in Walmart on September 28, 2024 and sell it today you would earn a total of  98,288  from holding Walmart or generate 111.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

Credicorp  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credicorp and Walmart

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

The idea behind Credicorp and Walmart 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.