Correlation Between United States and SANTANDER

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

By analyzing existing cross correlation between United States Steel and SANTANDER UK 10, you can compare the effects of market volatilities on United States and 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 United States with a short position of SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and SANTANDER.

Diversification Opportunities for United States and SANTANDER

0.38

Correlation Coefficient

United States  SANTANDER

Weak diversification

The 3 months correlation between United and SANTANDER is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and SANTANDER UK 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 10 and United States 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 United States Steel are associated (or correlated) with SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 10 has no effect on the direction of United States i.e., United States and SANTANDER go up and down completely randomly.

Pair Corralation between United States and SANTANDER

Assuming the 90 days trading horizon United States Steel is expected to generate 35.81 times more return on investment than SANTANDER. However, United States is 35.81 times more volatile than SANTANDER UK 10. It trades about 0.07 of its potential returns per unit of risk. SANTANDER UK 10 is currently generating about -0.03 per unit of risk. If you would invest  3,903  in United States Steel on September 2, 2024 and sell it today you would earn a total of  156.00  from holding United States Steel or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

United States Steel  vs.  SANTANDER UK 10

United States Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

SANTANDER UK 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SANTANDER is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United States and SANTANDER

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

The idea behind United States Steel and SANTANDER UK 10 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..