Correlation Between Credicorp and Bayfirst Financial

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

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

Diversification Opportunities for Credicorp and Bayfirst Financial

0.8

Correlation Coefficient

Credicorp  Bayfirst Financial

Very poor diversification

The 3 months correlation between Credicorp and Bayfirst is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Credicorp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp 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 Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of Credicorp i.e., Credicorp and Bayfirst Financial go up and down completely randomly.

Pair Corralation between Credicorp and Bayfirst Financial

Considering the 90-day investment horizon Credicorp is expected to generate 0.66 times more return on investment than Bayfirst Financial. However, Credicorp is 1.51 times less risky than Bayfirst Financial. It trades about 0.06 of its potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.0 per unit of risk. If you would invest  13,256  in Credicorp on June 16, 2024 and sell it today you would earn a total of  4,302  from holding Credicorp or generate 32.45% return on investment over 90 days.

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

Credicorp  vs.  Bayfirst Financial Corp

Credicorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Bayfirst Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Bayfirst Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credicorp and Bayfirst Financial

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

The idea behind Credicorp and Bayfirst Financial Corp 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.