Correlation Between Banco Santander and Royal Bank

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

Diversification Opportunities for Banco Santander and Royal Bank

-0.67

Correlation Coefficient

Banco Santander  Royal Bank

Excellent diversification

The 3 months correlation between Banco and Royal is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Banco Santander i.e., Banco Santander and Royal Bank go up and down completely randomly.

Pair Corralation between Banco Santander and Royal Bank

Assuming the 90 days horizon Banco Santander SA is expected to generate 3.09 times more return on investment than Royal Bank. However, Banco Santander is 3.09 times more volatile than Royal Bank of. It trades about 0.21 of its potential returns per unit of risk. Royal Bank of is currently generating about -0.03 per unit of risk. If you would invest  433.00  in Banco Santander SA on December 27, 2024 and sell it today you would earn a total of  257.00  from holding Banco Santander SA or generate 59.35% return on investment over 90 days.

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

Banco Santander SA  vs.  Royal Bank of

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 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Royal Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Royal Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Santander and Royal Bank

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

The idea behind Banco Santander SA and Royal Bank of 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.