Correlation Between Toronto Dominion and Credicorp

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

By analyzing existing cross correlation between Toronto Dominion Bank and Credicorp, you can compare the effects of market volatilities on Toronto Dominion 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 Toronto Dominion with a short position of Credicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Credicorp.

Diversification Opportunities for Toronto Dominion and Credicorp

0.56

Correlation Coefficient

Toronto Dominion  Credicorp

Very weak diversification

The 3 months correlation between Toronto and Credicorp is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp and Toronto Dominion 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 Toronto Dominion Bank 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 Toronto Dominion i.e., Toronto Dominion and Credicorp go up and down completely randomly.

Pair Corralation between Toronto Dominion and Credicorp

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to under-perform the Credicorp. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 1.37 times less risky than Credicorp. The stock trades about -0.01 of its potential returns per unit of risk. The Credicorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,866  in Credicorp on March 21, 2024 and sell it today you would earn a total of  3,825  from holding Credicorp or generate 32.23% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Credicorp

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Toronto Dominion and Credicorp

The main advantage of trading using opposite Toronto Dominion and Credicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion 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.

The idea behind Toronto Dominion Bank and Credicorp 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 CEOs Directory module to screen CEOs from public companies around the world.