Correlation Between Banco Santander and US Bancorp

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

Diversification Opportunities for Banco Santander and US Bancorp

-0.9

Correlation Coefficient

Banco Santander  US Bancorp

Pay attention - limited upside

The 3 months correlation between Banco and USB-PH is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Banco Santander i.e., Banco Santander and US Bancorp go up and down completely randomly.

Pair Corralation between Banco Santander and US Bancorp

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the US Bancorp. In addition to that, Banco Santander is 3.68 times more volatile than US Bancorp. It trades about -0.25 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.3 per unit of volatility. If you would invest  2,110  in US Bancorp on September 2, 2024 and sell it today you would earn a total of  198.00  from holding US Bancorp or generate 9.38% return on investment over 90 days.

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

Banco Santander Brasil  vs.  US 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.

US Bancorp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco Santander and US Bancorp

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

The idea behind Banco Santander Brasil and US 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.