Correlation Between Foreign Trade and Banco Santander

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

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

Diversification Opportunities for Foreign Trade and Banco Santander

0.38

Correlation Coefficient

Foreign Trade  Banco Santander

Weak diversification

The 3 months correlation between Foreign and Banco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Trade Bank and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile and Foreign Trade 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 Foreign Trade Bank 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 Chile has no effect on the direction of Foreign Trade i.e., Foreign Trade and Banco Santander go up and down completely randomly.

Pair Corralation between Foreign Trade and Banco Santander

Considering the 90-day investment horizon Foreign Trade is expected to generate 2.22 times less return on investment than Banco Santander. In addition to that, Foreign Trade is 1.4 times more volatile than Banco Santander Chile. It trades about 0.08 of its total potential returns per unit of risk. Banco Santander Chile is currently generating about 0.25 per unit of volatility. If you would invest  1,878  in Banco Santander Chile on December 29, 2024 and sell it today you would earn a total of  437.00  from holding Banco Santander Chile or generate 23.27% return on investment over 90 days.

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

Foreign Trade Bank  vs.  Banco Santander Chile

Foreign Trade Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Foreign Trade may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Banco Santander Chile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Banco Santander exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foreign Trade and Banco Santander

The main advantage of trading using opposite Foreign Trade and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foreign Trade 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 Foreign Trade Bank and Banco Santander Chile 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.