Correlation Between Banco De and Repsol

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

Diversification Opportunities for Banco De and Repsol

0.05

Correlation Coefficient

Banco De  Repsol

Significant diversification

The 3 months correlation between Banco and Repsol is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Sabadell and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol 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 Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Banco De i.e., Banco De and Repsol go up and down completely randomly.

Pair Corralation between Banco De and Repsol

Assuming the 90 days trading horizon Banco de Sabadell is expected to generate 1.81 times more return on investment than Repsol. However, Banco De is 1.81 times more volatile than Repsol. It trades about 0.07 of its potential returns per unit of risk. Repsol is currently generating about -0.04 per unit of risk. If you would invest  177.00  in Banco de Sabadell on September 12, 2024 and sell it today you would earn a total of  13.00  from holding Banco de Sabadell or generate 7.34% return on investment over 90 days.

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

Banco de Sabadell  vs.  Repsol

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.

Repsol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repsol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Repsol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco De and Repsol

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

The idea behind Banco de Sabadell and Repsol 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.