Correlation Between Companhia Energtica and Banco Santander

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

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

Diversification Opportunities for Companhia Energtica and Banco Santander

-0.32

Correlation Coefficient

Companhia Energtica  Banco Santander

Very good diversification

The 3 months correlation between Companhia and Banco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile and Companhia Energtica 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 Companhia Energtica de 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 Chile has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Banco Santander go up and down completely randomly.

Pair Corralation between Companhia Energtica and Banco Santander

Assuming the 90 days trading horizon Companhia Energtica is expected to generate 1.54 times less return on investment than Banco Santander. In addition to that, Companhia Energtica is 1.21 times more volatile than Banco Santander Chile. It trades about 0.0 of its total potential returns per unit of risk. Banco Santander Chile is currently generating about 0.0 per unit of volatility. If you would invest  5,718  in Banco Santander Chile on September 3, 2024 and sell it today you would lose (10.00) from holding Banco Santander Chile or give up 0.17% of portfolio value over 90 days.

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

Companhia Energtica de  vs.  Banco Santander Chile

Companhia Energtica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Energtica de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhia Energtica is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Santander Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Energtica and Banco Santander

The main advantage of trading using opposite Companhia Energtica and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energtica 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 Companhia Energtica de and Banco Santander Chile 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.