Correlation Between Caixabank and Banco Del

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

By analyzing existing cross correlation between Caixabank SA ADR and Banco del Bajo, you can compare the effects of market volatilities on Caixabank and Banco Del 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 Caixabank with a short position of Banco Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Banco Del.

Diversification Opportunities for Caixabank and Banco Del

0.55

Correlation Coefficient

Caixabank  Banco Del

Very weak diversification

The 3 months correlation between Caixabank and Banco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR and Banco del Bajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco del Bajo and Caixabank 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 Caixabank SA ADR are associated (or correlated) with Banco Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco del Bajo has no effect on the direction of Caixabank i.e., Caixabank and Banco Del go up and down completely randomly.

Pair Corralation between Caixabank and Banco Del

Assuming the 90 days horizon Caixabank is expected to generate 11.64 times less return on investment than Banco Del. But when comparing it to its historical volatility, Caixabank SA ADR is 2.2 times less risky than Banco Del. It trades about 0.02 of its potential returns per unit of risk. Banco del Bajo is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Banco del Bajo on October 25, 2024 and sell it today you would earn a total of  19.00  from holding Banco del Bajo or generate 8.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.51%
Values	Daily Returns

Caixabank SA ADR  vs.  Banco del Bajo

Caixabank SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Caixabank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco del Bajo

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Banco del Bajo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile forward-looking indicators, Banco Del reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caixabank and Banco Del

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

The idea behind Caixabank SA ADR and Banco del Bajo 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.