Correlation Between Banco De and Caixabank

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

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

Diversification Opportunities for Banco De and Caixabank

0.98

Correlation Coefficient

Banco De  Caixabank

Almost no diversification

The 3 months correlation between Banco and Caixabank is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Sabadell and Caixabank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA and Banco De 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 Banco de Sabadell are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA has no effect on the direction of Banco De i.e., Banco De and Caixabank go up and down completely randomly.

Pair Corralation between Banco De and Caixabank

Assuming the 90 days trading horizon Banco de Sabadell is expected to generate 1.11 times more return on investment than Caixabank. However, Banco De is 1.11 times more volatile than Caixabank SA. It trades about 0.17 of its potential returns per unit of risk. Caixabank SA is currently generating about 0.13 per unit of risk. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banco de Sabadell  vs.  Caixabank SA

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.

Caixabank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Caixabank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco De and Caixabank

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

The idea behind Banco de Sabadell and Caixabank SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.