Correlation Between Banco Bilbao and Repsol

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

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

Diversification Opportunities for Banco Bilbao and Repsol

0.32

Correlation Coefficient

Banco Bilbao  Repsol

Weak diversification

The 3 months correlation between Banco and Repsol is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol and Banco Bilbao 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 Bilbao Vizcaya are associated (or correlated) with Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Repsol go up and down completely randomly.

Pair Corralation between Banco Bilbao and Repsol

Assuming the 90 days trading horizon Banco Bilbao Vizcaya is expected to generate 1.31 times more return on investment than Repsol. However, Banco Bilbao is 1.31 times more volatile than Repsol. It trades about 0.07 of its potential returns per unit of risk. Repsol is currently generating about -0.01 per unit of risk. If you would invest  606.00  in Banco Bilbao Vizcaya on October 23, 2024 and sell it today you would earn a total of  437.00  from holding Banco Bilbao Vizcaya or generate 72.11% return on investment over 90 days.

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

Banco Bilbao Vizcaya  vs.  Repsol

Banco Bilbao Vizcaya

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Banco Bilbao exhibited solid returns over the last few months and may actually be approaching a breakup point.

Repsol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Repsol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco Bilbao and Repsol

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

The idea behind Banco Bilbao Vizcaya and Repsol 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.