Correlation Between Credicorp and Bank of America
Can any of the company-specific risk be diversified away by investing in both Credicorp and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credicorp and Bank of America, you can compare the effects of market volatilities on Credicorp and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credicorp and Bank of America.
Diversification Opportunities for Credicorp and Bank of America
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Credicorp and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Credicorp i.e., Credicorp and Bank of America go up and down completely randomly.
Pair Corralation between Credicorp and Bank of America
Assuming the 90 days trading horizon Credicorp is expected to generate 1.49 times less return on investment than Bank of America. But when comparing it to its historical volatility, Credicorp is 1.03 times less risky than Bank of America. It trades about 0.08 of its potential returns per unit of risk. Bank of America is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 79,611 in Bank of America on November 2, 2024 and sell it today you would earn a total of 16,472 from holding Bank of America or generate 20.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credicorp vs. Bank of America
Performance |
| Timeline |
| Credicorp |
| Bank of America |
Credicorp and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credicorp and Bank of America
The main advantage of trading using opposite Credicorp and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credicorp position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Credicorp vs. Grupo Sports World | Credicorp vs. GMxico Transportes SAB | Credicorp vs. Monster Beverage Corp | Credicorp vs. Delta Air Lines |
| Bank of America vs. The Home Depot | Bank of America vs. Applied Materials | Bank of America vs. Deutsche Bank Aktiengesellschaft | Bank of America vs. New Oriental Education |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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