Correlation Between Banco Santander and Natwest Group

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

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

Diversification Opportunities for Banco Santander and Natwest Group

-0.1

Correlation Coefficient

Banco Santander  Natwest Group

Good diversification

The 3 months correlation between Banco and Natwest is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Natwest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natwest Group 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 SA are associated (or correlated) with Natwest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natwest Group PLC has no effect on the direction of Banco Santander i.e., Banco Santander and Natwest Group go up and down completely randomly.

Pair Corralation between Banco Santander and Natwest Group

Assuming the 90 days horizon Banco Santander is expected to generate 14.94 times less return on investment than Natwest Group. In addition to that, Banco Santander is 2.61 times more volatile than Natwest Group PLC. It trades about 0.0 of its total potential returns per unit of risk. Natwest Group PLC is currently generating about 0.15 per unit of volatility. If you would invest  889.00  in Natwest Group PLC on September 4, 2024 and sell it today you would earn a total of  150.00  from holding Natwest Group PLC or generate 16.87% return on investment over 90 days.

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

Banco Santander SA  vs.  Natwest Group PLC

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Natwest Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Natwest Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Natwest Group

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

The idea behind Banco Santander SA and Natwest Group 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.