Correlation Between Asseco South and Banco Santander

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

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

Diversification Opportunities for Asseco South and Banco Santander

0.77

Correlation Coefficient

Asseco South  Banco Santander

Poor diversification

The 3 months correlation between Asseco and Banco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Asseco South Eastern 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 Asseco South 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 Asseco South Eastern 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 Asseco South i.e., Asseco South and Banco Santander go up and down completely randomly.

Pair Corralation between Asseco South and Banco Santander

Assuming the 90 days trading horizon Asseco South is expected to generate 1.77 times less return on investment than Banco Santander. But when comparing it to its historical volatility, Asseco South Eastern is 1.54 times less risky than Banco Santander. It trades about 0.24 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,877  in Banco Santander SA on December 30, 2024 and sell it today you would earn a total of  783.00  from holding Banco Santander SA or generate 41.72% return on investment over 90 days.

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

Asseco South Eastern  vs.  Banco Santander SA

Asseco South Eastern

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asseco South Eastern are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Asseco South reported solid returns over the last few months and may actually be approaching a breakup point.

Banco Santander SA

Risk-Adjusted Performance

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. Even with relatively weak basic indicators, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asseco South and Banco Santander

The main advantage of trading using opposite Asseco South and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asseco South 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 Asseco South Eastern 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.