Correlation Between First Community and Intercorp Financial
Can any of the company-specific risk be diversified away by investing in both First Community 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 First Community and Intercorp Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and Intercorp Financial Services, you can compare the effects of market volatilities on First Community 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 First Community with a short position of Intercorp Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Intercorp Financial.
Diversification Opportunities for First Community and Intercorp Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Intercorp is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Intercorp Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercorp Financial and First Community 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 First Community 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 First Community i.e., First Community and Intercorp Financial go up and down completely randomly.
Pair Corralation between First Community and Intercorp Financial
Given the investment horizon of 90 days First Community is expected to generate 1.15 times more return on investment than Intercorp Financial. However, First Community is 1.15 times more volatile than Intercorp Financial Services. It trades about 0.4 of its potential returns per unit of risk. Intercorp Financial Services is currently generating about 0.19 per unit of risk. If you would invest 2,342 in First Community on September 4, 2024 and sell it today you would earn a total of 273.00 from holding First Community or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. Intercorp Financial Services
Performance |
| Timeline |
| First Community |
| Intercorp Financial |
First Community and Intercorp Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Intercorp Financial
The main advantage of trading using opposite First Community and Intercorp Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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.| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
| Intercorp Financial vs. International Bancshares | Intercorp Financial vs. Finward Bancorp | Intercorp Financial vs. Aquagold International | Intercorp Financial vs. Thrivent High Yield |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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