Correlation Between Credicorp and KeyCorp

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

By analyzing existing cross correlation between Credicorp and KeyCorp, you can compare the effects of market volatilities on Credicorp and KeyCorp 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 KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credicorp and KeyCorp.

Diversification Opportunities for Credicorp and KeyCorp

0.42

Correlation Coefficient

Credicorp  KeyCorp

Very weak diversification

The 3 months correlation between Credicorp and KeyCorp is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Credicorp i.e., Credicorp and KeyCorp go up and down completely randomly.

Pair Corralation between Credicorp and KeyCorp

Considering the 90-day investment horizon Credicorp is expected to under-perform the KeyCorp. In addition to that, Credicorp is 1.79 times more volatile than KeyCorp. It trades about 0.0 of its total potential returns per unit of risk. KeyCorp is currently generating about 0.18 per unit of volatility. If you would invest  2,307  in KeyCorp on February 22, 2024 and sell it today you would earn a total of  85.00  from holding KeyCorp or generate 3.68% return on investment over 90 days.

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

Credicorp  vs.  KeyCorp

Credicorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credicorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Credicorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

KeyCorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Credicorp and KeyCorp

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

The idea behind Credicorp and KeyCorp 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.