Correlation Between Norwood Financial and Banco Santander

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

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

Diversification Opportunities for Norwood Financial and Banco Santander

-0.11

Correlation Coefficient

Norwood Financial  Banco Santander

Good diversification

The 3 months correlation between Norwood and Banco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Norwood Financial Corp 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 Norwood Financial 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 Norwood Financial Corp 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 Norwood Financial i.e., Norwood Financial and Banco Santander go up and down completely randomly.

Pair Corralation between Norwood Financial and Banco Santander

Given the investment horizon of 90 days Norwood Financial Corp is expected to under-perform the Banco Santander. In addition to that, Norwood Financial is 1.56 times more volatile than Banco Santander Brasil. It trades about -0.17 of its total potential returns per unit of risk. Banco Santander Brasil is currently generating about -0.08 per unit of volatility. If you would invest  419.00  in Banco Santander Brasil on October 9, 2024 and sell it today you would lose (22.00) from holding Banco Santander Brasil or give up 5.25% of portfolio value over 90 days.

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

Norwood Financial Corp  vs.  Banco Santander Brasil

Norwood Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norwood Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Norwood Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Banco Santander Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Norwood Financial and Banco Santander

The main advantage of trading using opposite Norwood Financial and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwood Financial 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 Norwood Financial Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.