Correlation Between Banco Santander and Sociedad Qumica

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

Diversification Opportunities for Banco Santander and Sociedad Qumica

-0.34

Correlation Coefficient

Banco Santander  Sociedad Qumica

Very good diversification

The 3 months correlation between Banco and Sociedad is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of Banco Santander i.e., Banco Santander and Sociedad Qumica go up and down completely randomly.

Pair Corralation between Banco Santander and Sociedad Qumica

Assuming the 90 days trading horizon Banco Santander Chile is expected to generate 0.52 times more return on investment than Sociedad Qumica. However, Banco Santander Chile is 1.92 times less risky than Sociedad Qumica. It trades about 0.19 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about -0.03 per unit of risk. If you would invest  4,679  in Banco Santander Chile on November 30, 2024 and sell it today you would earn a total of  520.00  from holding Banco Santander Chile or generate 11.11% 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.  Sociedad Qumica y

Banco Santander Chile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Banco Santander may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Sociedad Qumica y

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sociedad Qumica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sociedad Qumica is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Banco Santander and Sociedad Qumica

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

The idea behind Banco Santander Chile and Sociedad Qumica y 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.