Correlation Between Grupo Financiero and Intercorp Financial

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

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

Diversification Opportunities for Grupo Financiero and Intercorp Financial

0.87

Correlation Coefficient

Grupo Financiero  Intercorp Financial

Very poor diversification

The 3 months correlation between Grupo and Intercorp is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Galicia and Intercorp Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercorp Financial and Grupo Financiero 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 Grupo Financiero Galicia are associated (or correlated) with Intercorp Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercorp Financial has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and Intercorp Financial go up and down completely randomly.

Pair Corralation between Grupo Financiero and Intercorp Financial

Given the investment horizon of 90 days Grupo Financiero Galicia is expected to generate 2.92 times more return on investment than Intercorp Financial. However, Grupo Financiero is 2.92 times more volatile than Intercorp Financial Services. It trades about 0.22 of its potential returns per unit of risk. Intercorp Financial Services is currently generating about 0.14 per unit of risk. If you would invest  5,551  in Grupo Financiero Galicia on September 26, 2024 and sell it today you would earn a total of  936.00  from holding Grupo Financiero Galicia or generate 16.86% return on investment over 90 days.

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

Grupo Financiero Galicia  vs.  Intercorp Financial Services

Grupo Financiero Galicia

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Grupo Financiero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Intercorp Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intercorp Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Intercorp Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grupo Financiero and Intercorp Financial

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

The idea behind Grupo Financiero Galicia and Intercorp Financial Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.