Correlation Between Banco Santander and TEXAS ROADHOUSE

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

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

Diversification Opportunities for Banco Santander and TEXAS ROADHOUSE

-0.77

Correlation Coefficient

Banco Santander  TEXAS ROADHOUSE

Pay attention - limited upside

The 3 months correlation between Banco and TEXAS is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and TEXAS ROADHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEXAS ROADHOUSE 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 SA are associated (or correlated) with TEXAS ROADHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEXAS ROADHOUSE has no effect on the direction of Banco Santander i.e., Banco Santander and TEXAS ROADHOUSE go up and down completely randomly.

Pair Corralation between Banco Santander and TEXAS ROADHOUSE

Assuming the 90 days trading horizon Banco Santander SA is expected to generate 1.33 times more return on investment than TEXAS ROADHOUSE. However, Banco Santander is 1.33 times more volatile than TEXAS ROADHOUSE. It trades about 0.27 of its potential returns per unit of risk. TEXAS ROADHOUSE is currently generating about -0.06 per unit of risk. If you would invest  434.00  in Banco Santander SA on December 29, 2024 and sell it today you would earn a total of  198.00  from holding Banco Santander SA or generate 45.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Banco Santander SA  vs.  TEXAS ROADHOUSE

Banco Santander SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

TEXAS ROADHOUSE

Risk-Adjusted Performance

Very Weak

Over the last 90 days TEXAS ROADHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TEXAS ROADHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco Santander and TEXAS ROADHOUSE

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

The idea behind Banco Santander SA and TEXAS ROADHOUSE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.