Correlation Between Banco Santander and Citigroup

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

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

Diversification Opportunities for Banco Santander and Citigroup

0.91

Correlation Coefficient

Banco Santander  Citigroup

Almost no diversification

The @@bw1eo months correlation between Banco and Citigroup is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 SA are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Banco Santander i.e., Banco Santander and Citigroup go up and down completely randomly.

Pair Corralation between Banco Santander and Citigroup

Considering the 90-day investment horizon Banco Santander SA is expected to generate 1.18 times more return on investment than Citigroup. However, Banco Santander is 1.18 times more volatile than Citigroup. It trades about 0.1 of its potential returns per unit of risk. Citigroup is currently generating about 0.1 per unit of risk. If you would invest  333.00  in Banco Santander SA on February 3, 2024 and sell it today you would earn a total of  150.00  from holding Banco Santander SA or generate 45.05% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banco Santander SA  vs.  Citigroup

Banco Santander SA

Risk-Adjusted Performance

3 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Banco Santander is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Citigroup

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco Santander and Citigroup

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

The idea behind Banco Santander SA and Citigroup 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.