Correlation Between Banco Santander and Truist Financial

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

Diversification Opportunities for Banco Santander and Truist Financial

-0.73

Correlation Coefficient

Banco Santander  Truist Financial

Pay attention - limited upside

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

Pair Corralation between Banco Santander and Truist Financial

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the Truist Financial. In addition to that, Banco Santander is 2.09 times more volatile than Truist Financial Corp. It trades about -0.14 of its total potential returns per unit of risk. Truist Financial Corp is currently generating about -0.19 per unit of volatility. If you would invest  4,618  in Truist Financial Corp on September 21, 2024 and sell it today you would lose (286.00) from holding Truist Financial Corp or give up 6.19% of portfolio value over 90 days.

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

Banco Santander Brasil  vs.  Truist Financial Corp

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.

Truist Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco Santander and Truist Financial

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

The idea behind Banco Santander Brasil and Truist Financial Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.