Correlation Between Monnari Trade and Santander Bank

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

By analyzing existing cross correlation between Monnari Trade SA and Santander Bank Polska, you can compare the effects of market volatilities on Monnari Trade and Santander Bank 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 Monnari Trade with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monnari Trade and Santander Bank.

Diversification Opportunities for Monnari Trade and Santander Bank

0.15

Correlation Coefficient

Monnari Trade  Santander Bank

Average diversification

The 3 months correlation between Monnari and Santander is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Monnari Trade SA and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Monnari Trade 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 Monnari Trade SA are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Monnari Trade i.e., Monnari Trade and Santander Bank go up and down completely randomly.

Pair Corralation between Monnari Trade and Santander Bank

Assuming the 90 days trading horizon Monnari Trade SA is expected to under-perform the Santander Bank. But the stock apears to be less risky and, when comparing its historical volatility, Monnari Trade SA is 1.51 times less risky than Santander Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Santander Bank Polska is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  45,760  in Santander Bank Polska on December 29, 2024 and sell it today you would earn a total of  10,900  from holding Santander Bank Polska or generate 23.82% return on investment over 90 days.

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

Monnari Trade SA  vs.  Santander Bank Polska

Monnari Trade SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monnari Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Monnari Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Santander Bank Polska

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Santander Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monnari Trade and Santander Bank

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

The idea behind Monnari Trade SA and Santander Bank Polska 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.