Correlation Between Banco Santander and Farmers Bancorp

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

Diversification Opportunities for Banco Santander and Farmers Bancorp

-0.91

Correlation Coefficient

Banco Santander  Farmers Bancorp

Pay attention - limited upside

The 3 months correlation between Banco and Farmers is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers 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 Brasil are associated (or correlated) with Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of Banco Santander i.e., Banco Santander and Farmers Bancorp go up and down completely randomly.

Pair Corralation between Banco Santander and Farmers Bancorp

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the Farmers Bancorp. In addition to that, Banco Santander is 1.34 times more volatile than Farmers Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Farmers Bancorp is currently generating about 0.01 per unit of volatility. If you would invest  3,850  in Farmers Bancorp on September 27, 2024 and sell it today you would lose (2.00) from holding Farmers Bancorp or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.4%
Values	Daily Returns

Banco Santander Brasil  vs.  Farmers Bancorp

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.

Farmers Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Farmers Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Farmers Bancorp

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

The idea behind Banco Santander Brasil and Farmers 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.