Correlation Between UBS Group and Banco Santander

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

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

Diversification Opportunities for UBS Group and Banco Santander

0.2

Correlation Coefficient

UBS Group  Banco Santander

Modest diversification

The 3 months correlation between UBS and Banco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding UBS Group AG and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA and UBS Group 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 UBS Group AG are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of UBS Group i.e., UBS Group and Banco Santander go up and down completely randomly.

Pair Corralation between UBS Group and Banco Santander

Considering the 90-day investment horizon UBS Group AG is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, UBS Group AG is 1.2 times less risky than Banco Santander. The stock trades about -0.32 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  481.00  in Banco Santander SA on February 3, 2024 and sell it today you would earn a total of  6.00  from holding Banco Santander SA or generate 1.25% return on investment over 90 days.

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

UBS Group AG  vs.  Banco Santander SA

UBS Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, UBS Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Santander SA

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS Group and Banco Santander

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

The idea behind UBS Group AG and Banco Santander SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.