Correlation Between First Financial and Banco Santander

Can any of the company-specific risk be diversified away by investing in both First 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 First 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 First Financial Northwest and Banco Santander Chile, you can compare the effects of market volatilities on First 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 First Financial with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Banco Santander.

Diversification Opportunities for First Financial and Banco Santander

-0.15

Correlation Coefficient

First Financial  Banco Santander

Good diversification

The 3 months correlation between First and Banco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest 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 First 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 First Financial Northwest 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 First Financial i.e., First Financial and Banco Santander go up and down completely randomly.

Pair Corralation between First Financial and Banco Santander

Given the investment horizon of 90 days First Financial Northwest is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Northwest is 1.49 times less risky than Banco Santander. The stock trades about -0.11 of its potential returns per unit of risk. The Banco Santander Chile is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,897  in Banco Santander Chile on November 28, 2024 and sell it today you would earn a total of  303.00  from holding Banco Santander Chile or generate 15.97% return on investment over 90 days.

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

First Financial Northwest  vs.  Banco Santander Chile

First Financial Northwest

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Northwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Banco Santander Chile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Banco Santander exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and Banco Santander

The main advantage of trading using opposite First Financial and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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 First Financial Northwest 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.