Correlation Between BAWAG Group and Banco Santander

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

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

Diversification Opportunities for BAWAG Group and Banco Santander

0.32

Correlation Coefficient

BAWAG Group  Banco Santander

Weak diversification

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

Pair Corralation between BAWAG Group and Banco Santander

Assuming the 90 days horizon BAWAG Group AG is expected to generate 0.98 times more return on investment than Banco Santander. However, BAWAG Group AG is 1.02 times less risky than Banco Santander. It trades about 0.09 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.02 per unit of risk. If you would invest  6,850  in BAWAG Group AG on September 4, 2024 and sell it today you would earn a total of  525.00  from holding BAWAG Group AG or generate 7.66% return on investment over 90 days.

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

BAWAG Group AG  vs.  Banco Santander SA

BAWAG Group AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BAWAG Group AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BAWAG Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Banco Santander SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Banco Santander is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BAWAG Group and Banco Santander

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

The idea behind BAWAG Group AG and Banco Santander SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.