Correlation Between Repsol and Banco De

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

By analyzing existing cross correlation between Repsol and Banco de Sabadell, you can compare the effects of market volatilities on Repsol and Banco De 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 Repsol with a short position of Banco De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol and Banco De.

Diversification Opportunities for Repsol and Banco De

0.81

Correlation Coefficient

Repsol  Banco De

Very poor diversification

The 3 months correlation between Repsol and Banco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell and Repsol 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 Repsol are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of Repsol i.e., Repsol and Banco De go up and down completely randomly.

Pair Corralation between Repsol and Banco De

Assuming the 90 days trading horizon Repsol is expected to under-perform the Banco De. But the stock apears to be less risky and, when comparing its historical volatility, Repsol is 1.48 times less risky than Banco De. The stock trades about -0.02 of its potential returns per unit of risk. The Banco de Sabadell is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Banco de Sabadell on December 2, 2024 and sell it today you would earn a total of  142.00  from holding Banco de Sabadell or generate 114.52% return on investment over 90 days.

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

Repsol  vs.  Banco de Sabadell

Repsol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Repsol may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Banco de Sabadell

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Banco De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol and Banco De

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

The idea behind Repsol and Banco de Sabadell 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.