Correlation Between Sparebank and SANTANDER

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

By analyzing existing cross correlation between Sparebank 1 SR and SANTANDER UK 10, you can compare the effects of market volatilities on Sparebank 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 Sparebank with a short position of SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and SANTANDER.

Diversification Opportunities for Sparebank and SANTANDER

-0.55

Correlation Coefficient

Sparebank  SANTANDER

Excellent diversification

The 3 months correlation between Sparebank and SANTANDER is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR 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 Sparebank 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 Sparebank 1 SR 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 Sparebank i.e., Sparebank and SANTANDER go up and down completely randomly.

Pair Corralation between Sparebank and SANTANDER

Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 3.85 times more return on investment than SANTANDER. However, Sparebank is 3.85 times more volatile than SANTANDER UK 10. It trades about 0.1 of its potential returns per unit of risk. SANTANDER UK 10 is currently generating about -0.08 per unit of risk. If you would invest  14,340  in Sparebank 1 SR on October 21, 2024 and sell it today you would earn a total of  980.00  from holding Sparebank 1 SR or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Sparebank 1 SR  vs.  SANTANDER UK 10

Sparebank 1 SR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Sparebank and SANTANDER

The main advantage of trading using opposite Sparebank and SANTANDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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 Sparebank 1 SR 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.