Correlation Between Credicorp and Bancolombia
Can any of the company-specific risk be diversified away by investing in both Credicorp and Bancolombia 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 Bancolombia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credicorp and Bancolombia SA ADR, you can compare the effects of market volatilities on Credicorp and Bancolombia 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 Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credicorp and Bancolombia.
Diversification Opportunities for Credicorp and Bancolombia
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Credicorp and Bancolombia is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR 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 Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of Credicorp i.e., Credicorp and Bancolombia go up and down completely randomly.
Pair Corralation between Credicorp and Bancolombia
Considering the 90-day investment horizon Credicorp is expected to generate 33.06 times less return on investment than Bancolombia. But when comparing it to its historical volatility, Credicorp is 1.26 times less risky than Bancolombia. It trades about 0.01 of its potential returns per unit of risk. Bancolombia SA ADR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,160 in Bancolombia SA ADR on August 28, 2024 and sell it today you would earn a total of 173.00 from holding Bancolombia SA ADR or generate 5.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credicorp vs. Bancolombia SA ADR
Performance |
| Timeline |
| Credicorp |
| Bancolombia SA ADR |
Credicorp and Bancolombia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credicorp and Bancolombia
The main advantage of trading using opposite Credicorp and Bancolombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credicorp position performs unexpectedly, Bancolombia 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 Bancolombia will offset losses from the drop in Bancolombia's long position.| Credicorp vs. Heritage Financial | Credicorp vs. Home Federal Bancorp | Credicorp vs. Magyar Bancorp | Credicorp vs. National Bankshares |
| Bancolombia vs. Banco De Chile | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. Banco Santander Chile | Bancolombia vs. Intercorp Financial Services |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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