Correlation Between Banco Santander and Cielo SA

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

By analyzing existing cross correlation between Banco Santander Brasil and Cielo SA, you can compare the effects of market volatilities on Banco Santander and Cielo SA 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 Cielo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Cielo SA.

Diversification Opportunities for Banco Santander and Cielo SA

0.73

Correlation Coefficient

Banco Santander  Cielo SA

Poor diversification

The 3 months correlation between Banco and Cielo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and Cielo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cielo SA 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 Brasil are associated (or correlated) with Cielo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cielo SA has no effect on the direction of Banco Santander i.e., Banco Santander and Cielo SA go up and down completely randomly.

Pair Corralation between Banco Santander and Cielo SA

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the Cielo SA. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander Brasil is 8.61 times less risky than Cielo SA. The stock trades about -0.25 of its potential returns per unit of risk. The Cielo SA is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Cielo SA on September 3, 2024 and sell it today you would earn a total of  33.00  from holding Cielo SA or generate 64.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	15.63%
Values	Daily Returns

Banco Santander Brasil  vs.  Cielo SA

Banco Santander Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cielo SA

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Cielo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Cielo SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Cielo SA

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

The idea behind Banco Santander Brasil and Cielo SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.