Correlation Between Enea SA and Santander Bank

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

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

Diversification Opportunities for Enea SA and Santander Bank

-0.31

Correlation Coefficient

Enea SA  Santander Bank

Very good diversification

The 3 months correlation between Enea and Santander is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Enea SA and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Enea SA 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 Enea SA are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Enea SA i.e., Enea SA and Santander Bank go up and down completely randomly.

Pair Corralation between Enea SA and Santander Bank

Assuming the 90 days trading horizon Enea SA is expected to generate 1.01 times more return on investment than Santander Bank. However, Enea SA is 1.01 times more volatile than Santander Bank Polska. It trades about 0.06 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.03 per unit of risk. If you would invest  1,070  in Enea SA on September 13, 2024 and sell it today you would earn a total of  69.00  from holding Enea SA or generate 6.45% return on investment over 90 days.

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

Enea SA  vs.  Santander Bank Polska

Enea SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enea SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Enea SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Santander Bank Polska

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Santander Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Enea SA and Santander Bank

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

The idea behind Enea SA and Santander Bank Polska 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.