Correlation Between Banco De and Industria

Can any of the company-specific risk be diversified away by investing in both Banco De and Industria 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 Industria 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 Industria de Diseno, you can compare the effects of market volatilities on Banco De and Industria 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 Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Industria.

Diversification Opportunities for Banco De and Industria

0.48

Correlation Coefficient

Banco De  Industria

Very weak diversification

The 3 months correlation between Banco and Industria is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Sabadell and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Banco De i.e., Banco De and Industria go up and down completely randomly.

Pair Corralation between Banco De and Industria

Assuming the 90 days trading horizon Banco de Sabadell is expected to generate 1.51 times more return on investment than Industria. However, Banco De is 1.51 times more volatile than Industria de Diseno. It trades about 0.1 of its potential returns per unit of risk. Industria de Diseno is currently generating about 0.12 per unit of risk. If you would invest  105.00  in Banco de Sabadell on September 12, 2024 and sell it today you would earn a total of  85.00  from holding Banco de Sabadell or generate 80.95% return on investment over 90 days.

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

Banco de Sabadell  vs.  Industria de Diseno

Banco de Sabadell

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Banco De may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Industria de Diseno

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industria de Diseno are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Industria may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco De and Industria

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

The idea behind Banco de Sabadell and Industria de Diseno 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.