Correlation Between Banco Santander and Pentair Plc

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

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

Diversification Opportunities for Banco Santander and Pentair Plc

-0.86

Correlation Coefficient

Banco Santander  Pentair Plc

Pay attention - limited upside

The 3 months correlation between Banco and Pentair is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 Chile are associated (or correlated) with Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Banco Santander i.e., Banco Santander and Pentair Plc go up and down completely randomly.

Pair Corralation between Banco Santander and Pentair Plc

Assuming the 90 days trading horizon Banco Santander Chile is expected to generate 2.15 times more return on investment than Pentair Plc. However, Banco Santander is 2.15 times more volatile than Pentair plc. It trades about 0.17 of its potential returns per unit of risk. Pentair plc is currently generating about -0.14 per unit of risk. If you would invest  5,868  in Banco Santander Chile on December 24, 2024 and sell it today you would earn a total of  712.00  from holding Banco Santander Chile or generate 12.13% return on investment over 90 days.

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

Banco Santander Chile  vs.  Pentair plc

Banco Santander Chile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Santander sustained solid returns over the last few months and may actually be approaching a breakup point.

Pentair plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pentair Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Santander and Pentair Plc

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

The idea behind Banco Santander Chile and Pentair plc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.