Correlation Between Banco Santander and Great Southern

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

Diversification Opportunities for Banco Santander and Great Southern

-0.56

Correlation Coefficient

Banco Santander  Great Southern

Excellent diversification

The 3 months correlation between Banco and Great is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and Great Southern Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Southern Bancorp 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 Great Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Southern Bancorp has no effect on the direction of Banco Santander i.e., Banco Santander and Great Southern go up and down completely randomly.

Pair Corralation between Banco Santander and Great Southern

Given the investment horizon of 90 days Banco Santander Chile is expected to under-perform the Great Southern. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander Chile is 1.83 times less risky than Great Southern. The stock trades about -0.07 of its potential returns per unit of risk. The Great Southern Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,678  in Great Southern Bancorp on September 5, 2024 and sell it today you would earn a total of  785.00  from holding Great Southern Bancorp or generate 13.83% 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.  Great Southern Bancorp

Banco Santander Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Great Southern Bancorp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Southern Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Great Southern exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Great Southern

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

The idea behind Banco Santander Chile and Great Southern Bancorp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.