Correlation Between Permanent TSB and Banco Del

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

By analyzing existing cross correlation between Permanent TSB Group and Banco del Bajo, you can compare the effects of market volatilities on Permanent TSB and Banco Del 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 Permanent TSB with a short position of Banco Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permanent TSB and Banco Del.

Diversification Opportunities for Permanent TSB and Banco Del

-0.18

Correlation Coefficient

Permanent TSB  Banco Del

Good diversification

The 3 months correlation between Permanent and Banco is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Permanent TSB Group and Banco del Bajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco del Bajo and Permanent TSB 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 Permanent TSB Group are associated (or correlated) with Banco Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco del Bajo has no effect on the direction of Permanent TSB i.e., Permanent TSB and Banco Del go up and down completely randomly.

Pair Corralation between Permanent TSB and Banco Del

Assuming the 90 days horizon Permanent TSB is expected to generate 7.36 times less return on investment than Banco Del. But when comparing it to its historical volatility, Permanent TSB Group is 2.01 times less risky than Banco Del. It trades about 0.03 of its potential returns per unit of risk. Banco del Bajo is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Banco del Bajo on December 21, 2024 and sell it today you would earn a total of  12.00  from holding Banco del Bajo or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.46%
Values	Daily Returns

Permanent TSB Group  vs.  Banco del Bajo

Permanent TSB Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Permanent TSB Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Permanent TSB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco del Bajo

Risk-Adjusted Performance

OK

Over the last 90 days Banco del Bajo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile forward-looking indicators, Banco Del reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permanent TSB and Banco Del

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

The idea behind Permanent TSB Group and Banco del Bajo 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.