Correlation Between Danaher and Credicorp

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

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

Diversification Opportunities for Danaher and Credicorp

-0.7

Correlation Coefficient

Danaher  Credicorp

Excellent diversification

The 3 months correlation between Danaher and Credicorp is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Danaher 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 Danaher 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 Danaher i.e., Danaher and Credicorp go up and down completely randomly.

Pair Corralation between Danaher and Credicorp

Assuming the 90 days trading horizon Danaher is expected to under-perform the Credicorp. In addition to that, Danaher is 1.06 times more volatile than Credicorp. It trades about -0.08 of its total potential returns per unit of risk. Credicorp is currently generating about 0.09 per unit of volatility. 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

Danaher  vs.  Credicorp

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.

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.

Pair Trading with Danaher and Credicorp

The main advantage of trading using opposite Danaher and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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 Danaher 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.