Correlation Between Bankinter and Western Alliance

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

By analyzing existing cross correlation between Bankinter SA ADR and Western Alliance Bancorporation, you can compare the effects of market volatilities on Bankinter and Western Alliance 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 Bankinter with a short position of Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Western Alliance.

Diversification Opportunities for Bankinter and Western Alliance

0.15

Correlation Coefficient

Bankinter  Western Alliance

Average diversification

The 3 months correlation between Bankinter and Western is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter SA ADR and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban and Bankinter 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 Bankinter SA ADR are associated (or correlated) with Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Bankinter i.e., Bankinter and Western Alliance go up and down completely randomly.

Pair Corralation between Bankinter and Western Alliance

Assuming the 90 days horizon Bankinter SA ADR is expected to generate 0.81 times more return on investment than Western Alliance. However, Bankinter SA ADR is 1.23 times less risky than Western Alliance. It trades about 0.25 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about -0.06 per unit of risk. If you would invest  893.00  in Bankinter SA ADR on November 19, 2024 and sell it today you would earn a total of  85.00  from holding Bankinter SA ADR or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bankinter SA ADR  vs.  Western Alliance Bancorp.

Bankinter SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bankinter SA ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Bankinter showed solid returns over the last few months and may actually be approaching a breakup point.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Western Alliance is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bankinter and Western Alliance

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

The idea behind Bankinter SA ADR and Western Alliance Bancorporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.