Correlation Between Barclays PLC and Banco De

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

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

Diversification Opportunities for Barclays PLC and Banco De

0.85

Correlation Coefficient

Barclays PLC  Banco De

Very poor diversification

The 3 months correlation between Barclays and Banco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell and Barclays PLC 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 Barclays PLC are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of Barclays PLC i.e., Barclays PLC and Banco De go up and down completely randomly.

Pair Corralation between Barclays PLC and Banco De

Assuming the 90 days horizon Barclays PLC is expected to generate 2.7 times less return on investment than Banco De. But when comparing it to its historical volatility, Barclays PLC is 1.46 times less risky than Banco De. It trades about 0.07 of its potential returns per unit of risk. Banco de Sabadell is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Banco de Sabadell on December 3, 2024 and sell it today you would earn a total of  180.00  from holding Banco de Sabadell or generate 189.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	48.47%
Values	Daily Returns

Barclays PLC  vs.  Banco de Sabadell

Barclays PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Barclays PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Banco de Sabadell

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Banco De reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays PLC and Banco De

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

The idea behind Barclays PLC and Banco de Sabadell 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.