Correlation Between Banco Do and Banco Santander

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

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

Diversification Opportunities for Banco Do and Banco Santander

-0.37

Correlation Coefficient

Banco Do  Banco Santander

Very good diversification

The 3 months correlation between Banco and Banco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado 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 Banco Do 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 do Estado 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 Banco Do i.e., Banco Do and Banco Santander go up and down completely randomly.

Pair Corralation between Banco Do and Banco Santander

Assuming the 90 days trading horizon Banco do Estado is expected to generate 2.33 times more return on investment than Banco Santander. However, Banco Do is 2.33 times more volatile than Banco Santander SA. It trades about 0.04 of its potential returns per unit of risk. Banco Santander SA is currently generating about -0.26 per unit of risk. If you would invest  1,588  in Banco do Estado on August 31, 2024 and sell it today you would earn a total of  83.00  from holding Banco do Estado or generate 5.23% return on investment over 90 days.

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

Banco do Estado  vs.  Banco Santander SA

Banco do Estado

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Estado are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Banco Do may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Do and Banco Santander

The main advantage of trading using opposite Banco Do and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do 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 Banco do Estado 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 Stocks Directory module to find actively traded stocks across global markets.