Correlation Between Royal Bank and Banco Bilbao

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

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

Diversification Opportunities for Royal Bank and Banco Bilbao

-0.33

Correlation Coefficient

Royal Bank  Banco Bilbao

Very good diversification

The 3 months correlation between Royal and Banco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Banco Bilbao Viscaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Viscaya and Royal Bank 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 Royal Bank of are associated (or correlated) with Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Viscaya has no effect on the direction of Royal Bank i.e., Royal Bank and Banco Bilbao go up and down completely randomly.

Pair Corralation between Royal Bank and Banco Bilbao

Allowing for the 90-day total investment horizon Royal Bank is expected to generate 1.05 times less return on investment than Banco Bilbao. But when comparing it to its historical volatility, Royal Bank of is 2.36 times less risky than Banco Bilbao. It trades about 0.04 of its potential returns per unit of risk. Banco Bilbao Viscaya is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,011  in Banco Bilbao Viscaya on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Banco Bilbao Viscaya or generate 0.79% return on investment over 90 days.

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

Royal Bank of  vs.  Banco Bilbao Viscaya

Royal Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Banco Bilbao Viscaya

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Banco Bilbao is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royal Bank and Banco Bilbao

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

The idea behind Royal Bank of and Banco Bilbao Viscaya 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.