Correlation Between CHINA CONBANK and Banco Santander

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

By analyzing existing cross correlation between CHINA BANK ADR20 and Banco Santander SA, you can compare the effects of market volatilities on CHINA CONBANK and Banco Santander 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 CHINA CONBANK with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA CONBANK and Banco Santander.

Diversification Opportunities for CHINA CONBANK and Banco Santander

0.88

Correlation Coefficient

CHINA CONBANK  Banco Santander

Very poor diversification

The 3 months correlation between CHINA and Banco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA and CHINA CONBANK 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 CHINA BANK ADR20 are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of CHINA CONBANK i.e., CHINA CONBANK and Banco Santander go up and down completely randomly.

Pair Corralation between CHINA CONBANK and Banco Santander

Assuming the 90 days trading horizon CHINA CONBANK is expected to generate 9.52 times less return on investment than Banco Santander. But when comparing it to its historical volatility, CHINA BANK ADR20 is 1.18 times less risky than Banco Santander. It trades about 0.04 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Banco Santander SA on December 29, 2024 and sell it today you would earn a total of  200.00  from holding Banco Santander SA or generate 46.51% return on investment over 90 days.

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

CHINA BANK ADR20  vs.  Banco Santander SA

CHINA BANK ADR20

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CHINA CONBANK is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA CONBANK and Banco Santander

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

The idea behind CHINA BANK ADR20 and Banco Santander SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.