Correlation Between National Capital and Banco Santander

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

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

Diversification Opportunities for National Capital and Banco Santander

-0.03

Correlation Coefficient

National Capital  Banco Santander

Good diversification

The 3 months correlation between National and Banco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank 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 National Capital 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 National Capital Bank 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 National Capital i.e., National Capital and Banco Santander go up and down completely randomly.

Pair Corralation between National Capital and Banco Santander

Given the investment horizon of 90 days National Capital Bank is expected to under-perform the Banco Santander. In addition to that, National Capital is 2.12 times more volatile than Banco Santander Chile. It trades about -0.04 of its total potential returns per unit of risk. Banco Santander Chile is currently generating about 0.25 per unit of volatility. If you would invest  1,872  in Banco Santander Chile on December 21, 2024 and sell it today you would earn a total of  421.00  from holding Banco Santander Chile or generate 22.49% return on investment over 90 days.

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

National Capital Bank  vs.  Banco Santander Chile

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Banco Santander Chile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 19 (%) 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 National Capital and Banco Santander

The main advantage of trading using opposite National Capital and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.