Correlation Between Enterprise Financial and Banco Santander

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

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

Diversification Opportunities for Enterprise Financial and Banco Santander

-0.81

Correlation Coefficient

Enterprise Financial  Banco Santander

Pay attention - limited upside

The 3 months correlation between Enterprise and Banco is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil and Enterprise Financial 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 Enterprise Financial Services 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 Brasil has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Banco Santander go up and down completely randomly.

Pair Corralation between Enterprise Financial and Banco Santander

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 1.09 times more return on investment than Banco Santander. However, Enterprise Financial is 1.09 times more volatile than Banco Santander Brasil. It trades about 0.03 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.0 per unit of risk. If you would invest  4,645  in Enterprise Financial Services on September 21, 2024 and sell it today you would earn a total of  1,052  from holding Enterprise Financial Services or generate 22.64% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Banco Santander Brasil

Enterprise Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Enterprise Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Enterprise Financial and Banco Santander

The main advantage of trading using opposite Enterprise Financial and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Financial 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 Enterprise Financial Services and Banco Santander Brasil 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.