Correlation Between Banco Santander and Banco De

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

By analyzing existing cross correlation between Banco Santander and Banco de Sabadell, you can compare the effects of market volatilities on Banco Santander and Banco De 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 Banco Santander with a short position of Banco De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Banco De.

Diversification Opportunities for Banco Santander and Banco De

0.88

Correlation Coefficient

Banco Santander  Banco De

Very poor diversification

The 3 months correlation between Banco and Banco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell and Banco Santander 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 Banco Santander are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of Banco Santander i.e., Banco Santander and Banco De go up and down completely randomly.

Pair Corralation between Banco Santander and Banco De

Assuming the 90 days trading horizon Banco Santander is expected to under-perform the Banco De. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander is 1.23 times less risky than Banco De. The stock trades about -0.03 of its potential returns per unit of risk. The Banco de Sabadell is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Banco de Sabadell on March 10, 2024 and sell it today you would earn a total of  6.00  from holding Banco de Sabadell or generate 3.23% return on investment over 90 days.

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

Banco Santander  vs.  Banco de Sabadell

Banco Santander

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Banco Santander exhibited solid returns over the last few months and may actually be approaching a breakup point.

Banco de Sabadell

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Banco De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Banco De

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

The idea behind Banco Santander and Banco de Sabadell 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 Commodity Directory module to find actively traded commodities issued by global exchanges.