Correlation Between Grupo Financiero and Banco Santander

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

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

Diversification Opportunities for Grupo Financiero and Banco Santander

-0.54

Correlation Coefficient

Grupo Financiero  Banco Santander

Excellent diversification

The 3 months correlation between Grupo and Banco is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Galicia 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 Grupo Financiero 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 Grupo Financiero Galicia 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 Grupo Financiero i.e., Grupo Financiero and Banco Santander go up and down completely randomly.

Pair Corralation between Grupo Financiero and Banco Santander

Given the investment horizon of 90 days Grupo Financiero Galicia is expected to under-perform the Banco Santander. In addition to that, Grupo Financiero is 1.6 times more volatile than Banco Santander Brasil. It trades about -0.02 of its total potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.18 per unit of volatility. If you would invest  389.00  in Banco Santander Brasil on December 28, 2024 and sell it today you would earn a total of  92.00  from holding Banco Santander Brasil or generate 23.65% return on investment over 90 days.

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

Grupo Financiero Galicia  vs.  Banco Santander Brasil

Grupo Financiero Galicia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Financiero Galicia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Grupo Financiero is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 Grupo Financiero and Banco Santander

The main advantage of trading using opposite Grupo Financiero and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero 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 Grupo Financiero Galicia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.