Correlation Between First Bancshares, and Banco Santander

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

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

Diversification Opportunities for First Bancshares, and Banco Santander

0.51

Correlation Coefficient

First Bancshares,  Banco Santander

Very weak diversification

The 3 months correlation between First and Banco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding The First Bancshares, 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 First Bancshares, 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 The First Bancshares, 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 First Bancshares, i.e., First Bancshares, and Banco Santander go up and down completely randomly.

Pair Corralation between First Bancshares, and Banco Santander

Given the investment horizon of 90 days First Bancshares, is expected to generate 6.61 times less return on investment than Banco Santander. But when comparing it to its historical volatility, The First Bancshares, is 1.3 times less risky than Banco Santander. It trades about 0.03 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Banco Santander Brasil on December 19, 2024 and sell it today you would earn a total of  89.00  from holding Banco Santander Brasil or generate 23.12% return on investment over 90 days.

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

The First Bancshares,  vs.  Banco Santander Brasil

First Bancshares,

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The First Bancshares, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, First Bancshares, is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Santander Brasil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Brasil are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancshares, and Banco Santander

The main advantage of trading using opposite First Bancshares, and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares, 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 The First Bancshares, 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.