Correlation Between Banco Santander and National Capital

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

Diversification Opportunities for Banco Santander and National Capital

-0.03

Correlation Coefficient

Banco Santander  National Capital

Good diversification

The 3 months correlation between Banco and National is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank 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 National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of Banco Santander i.e., Banco Santander and National Capital go up and down completely randomly.

Pair Corralation between Banco Santander and National Capital

Given the investment horizon of 90 days Banco Santander Chile is expected to generate 0.47 times more return on investment than National Capital. However, Banco Santander Chile is 2.12 times less risky than National Capital. It trades about 0.25 of its potential returns per unit of risk. National Capital Bank is currently generating about -0.04 per unit of risk. If you would invest  1,872  in Banco Santander Chile on December 21, 2024 and sell it today you would earn a total of  421.00  from holding Banco Santander Chile or generate 22.49% return on investment over 90 days.

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

Banco Santander Chile  vs.  National Capital Bank

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.

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco Santander and National Capital

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

The idea behind Banco Santander Chile and National Capital Bank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.