Correlation Between Banco Santander and Main Street

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

Diversification Opportunities for Banco Santander and Main Street

-0.5

Correlation Coefficient

Banco Santander  Main Street

Very good diversification

The 3 months correlation between Banco and Main is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of Banco Santander i.e., Banco Santander and Main Street go up and down completely randomly.

Pair Corralation between Banco Santander and Main Street

Given the investment horizon of 90 days Banco Santander Brasil is expected to generate 0.91 times more return on investment than Main Street. However, Banco Santander Brasil is 1.09 times less risky than Main Street. It trades about -0.04 of its potential returns per unit of risk. Main Street Financial is currently generating about -0.04 per unit of risk. If you would invest  557.00  in Banco Santander Brasil on October 4, 2024 and sell it today you would lose (166.00) from holding Banco Santander Brasil or give up 29.8% of portfolio value over 90 days.

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

Banco Santander Brasil  vs.  Main Street Financial

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 February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Main Street Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Banco Santander and Main Street

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

The idea behind Banco Santander Brasil and Main Street Financial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.