Correlation Between Western Alliance and Credicorp
Can any of the company-specific risk be diversified away by investing in both Western Alliance 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 Western Alliance and Credicorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Alliance Bancorporation and Credicorp, you can compare the effects of market volatilities on Western Alliance 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 Western Alliance with a short position of Credicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and Credicorp.
Diversification Opportunities for Western Alliance and Credicorp
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Credicorp is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Western Alliance 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 Western Alliance Bancorporation 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 Western Alliance i.e., Western Alliance and Credicorp go up and down completely randomly.
Pair Corralation between Western Alliance and Credicorp
Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 2.55 times more return on investment than Credicorp. However, Western Alliance is 2.55 times more volatile than Credicorp. It trades about 0.05 of its potential returns per unit of risk. Credicorp is currently generating about 0.05 per unit of risk. If you would invest 3,520 in Western Alliance Bancorporation on January 17, 2025 and sell it today you would earn a total of 3,129 from holding Western Alliance Bancorporation or generate 88.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Alliance Bancorp. vs. Credicorp
Performance |
| Timeline |
| Western Alliance Ban |
| Credicorp |
Western Alliance and Credicorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alliance and Credicorp
The main advantage of trading using opposite Western Alliance and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance 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.| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
| Credicorp vs. Heritage Financial | Credicorp vs. Home Federal Bancorp | Credicorp vs. Magyar Bancorp | Credicorp vs. National Bankshares |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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