Correlation Between Banco Santander and Grupo Financiero

Can any of the company-specific risk be diversified away by investing in both Banco Santander and Grupo Financiero 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 Grupo Financiero 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 Grupo Financiero Galicia, you can compare the effects of market volatilities on Banco Santander and Grupo Financiero 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 Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Grupo Financiero.

Diversification Opportunities for Banco Santander and Grupo Financiero

-0.8

Correlation Coefficient

Banco Santander  Grupo Financiero

Pay attention - limited upside

The 3 months correlation between Banco and Grupo is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Banco Santander i.e., Banco Santander and Grupo Financiero go up and down completely randomly.

Pair Corralation between Banco Santander and Grupo Financiero

Given the investment horizon of 90 days Banco Santander Chile is expected to generate 0.42 times more return on investment than Grupo Financiero. However, Banco Santander Chile is 2.4 times less risky than Grupo Financiero. It trades about 0.27 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about -0.02 per unit of risk. If you would invest  1,878  in Banco Santander Chile on December 28, 2024 and sell it today you would earn a total of  471.00  from holding Banco Santander Chile or generate 25.08% return on investment over 90 days.

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

Banco Santander Chile  vs.  Grupo Financiero Galicia

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 21 (%) 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.

Grupo Financiero Galicia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Banco Santander and Grupo Financiero

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

The idea behind Banco Santander Chile and Grupo Financiero Galicia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.