Correlation Between Banco De and Sociedad Punta

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

By analyzing existing cross correlation between Banco de Credito and Sociedad Punta del, you can compare the effects of market volatilities on Banco De and Sociedad Punta 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 Banco De with a short position of Sociedad Punta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Sociedad Punta.

Diversification Opportunities for Banco De and Sociedad Punta

0.09

Correlation Coefficient

Banco De  Sociedad Punta

Significant diversification

The 3 months correlation between Banco and Sociedad is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and Sociedad Punta del in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Punta del and Banco De 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 Banco de Credito are associated (or correlated) with Sociedad Punta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Punta del has no effect on the direction of Banco De i.e., Banco De and Sociedad Punta go up and down completely randomly.

Pair Corralation between Banco De and Sociedad Punta

Assuming the 90 days trading horizon Banco de Credito is expected to generate 1.78 times more return on investment than Sociedad Punta. However, Banco De is 1.78 times more volatile than Sociedad Punta del. It trades about -0.01 of its potential returns per unit of risk. Sociedad Punta del is currently generating about -0.08 per unit of risk. If you would invest  2,827,100  in Banco de Credito on August 31, 2024 and sell it today you would lose (50,100) from holding Banco de Credito or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Banco de Credito  vs.  Sociedad Punta del

Banco de Credito

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco de Credito has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Banco De is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Sociedad Punta del

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Punta del has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sociedad Punta is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco De and Sociedad Punta

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

The idea behind Banco de Credito and Sociedad Punta del 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.