Correlation Between Banco Santander and Patria Investments

Can any of the company-specific risk be diversified away by investing in both Banco Santander and Patria Investments 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 Patria Investments 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 Patria Investments Limited, you can compare the effects of market volatilities on Banco Santander and Patria Investments 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 Patria Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Patria Investments.

Diversification Opportunities for Banco Santander and Patria Investments

0.28

Correlation Coefficient

Banco Santander  Patria Investments

Modest diversification

The 3 months correlation between Banco and Patria is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Banco Santander i.e., Banco Santander and Patria Investments go up and down completely randomly.

Pair Corralation between Banco Santander and Patria Investments

Assuming the 90 days trading horizon Banco Santander Chile is expected to generate 0.7 times more return on investment than Patria Investments. However, Banco Santander Chile is 1.43 times less risky than Patria Investments. It trades about -0.08 of its potential returns per unit of risk. Patria Investments Limited is currently generating about -0.22 per unit of risk. If you would invest  5,790  in Banco Santander Chile on October 22, 2024 and sell it today you would lose (66.00) from holding Banco Santander Chile or give up 1.14% of portfolio value over 90 days.

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

Banco Santander Chile  vs.  Patria Investments Limited

Banco Santander Chile

Risk-Adjusted Performance

0 of 100

Very Weak

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

Patria Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Banco Santander and Patria Investments

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

The idea behind Banco Santander Chile and Patria Investments Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.