Correlation Between Banco Santander and BBVA Banco

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

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

Diversification Opportunities for Banco Santander and BBVA Banco

-0.51

Correlation Coefficient

Banco Santander  BBVA Banco

Excellent diversification

The 3 months correlation between Banco and BBVA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Banco Santander 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 Santander Chile are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Banco Santander i.e., Banco Santander and BBVA Banco go up and down completely randomly.

Pair Corralation between Banco Santander and BBVA Banco

Given the investment horizon of 90 days Banco Santander Chile is expected to generate 0.34 times more return on investment than BBVA Banco. However, Banco Santander Chile is 2.95 times less risky than BBVA Banco. It trades about 0.26 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.02 per unit of risk. If you would invest  1,900  in Banco Santander Chile on December 27, 2024 and sell it today you would earn a total of  451.00  from holding Banco Santander Chile or generate 23.74% return on investment over 90 days.

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

Banco Santander Chile  vs.  BBVA Banco Frances

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 20 (%) 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.

BBVA Banco Frances

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BBVA Banco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Banco Santander and BBVA Banco

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

The idea behind Banco Santander Chile and BBVA Banco Frances 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.