Correlation Between Invesco Morningstar and SANTANDER

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

By analyzing existing cross correlation between Invesco Morningstar Energy and SANTANDER UK 10, you can compare the effects of market volatilities on Invesco Morningstar and 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 Invesco Morningstar with a short position of SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Morningstar and SANTANDER.

Diversification Opportunities for Invesco Morningstar and SANTANDER

-0.34

Correlation Coefficient

Invesco Morningstar  SANTANDER

Very good diversification

The 3 months correlation between Invesco and SANTANDER is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Morningstar Energy and SANTANDER UK 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 10 and Invesco Morningstar 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 Invesco Morningstar Energy are associated (or correlated) with SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 10 has no effect on the direction of Invesco Morningstar i.e., Invesco Morningstar and SANTANDER go up and down completely randomly.

Pair Corralation between Invesco Morningstar and SANTANDER

Assuming the 90 days trading horizon Invesco Morningstar Energy is expected to generate 3.08 times more return on investment than SANTANDER. However, Invesco Morningstar is 3.08 times more volatile than SANTANDER UK 10. It trades about 0.23 of its potential returns per unit of risk. SANTANDER UK 10 is currently generating about -0.07 per unit of risk. If you would invest  12,546  in Invesco Morningstar Energy on October 23, 2024 and sell it today you would earn a total of  1,753  from holding Invesco Morningstar Energy or generate 13.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Invesco Morningstar Energy  vs.  SANTANDER UK 10

Invesco Morningstar

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Morningstar Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Morningstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

SANTANDER UK 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SANTANDER is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Morningstar and SANTANDER

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

The idea behind Invesco Morningstar Energy and SANTANDER UK 10 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.