Correlation Between SANTANDER and MT Bank

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

By analyzing existing cross correlation between SANTANDER UK 10 and MT Bank Corp, you can compare the effects of market volatilities on SANTANDER and MT Bank 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 SANTANDER with a short position of MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and MT Bank.

Diversification Opportunities for SANTANDER and MT Bank

0.42

Correlation Coefficient

SANTANDER  MT Bank

Very weak diversification

The 3 months correlation between SANTANDER and 0JW2 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 10 and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp and SANTANDER 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 SANTANDER UK 10 are associated (or correlated) with MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of SANTANDER i.e., SANTANDER and MT Bank go up and down completely randomly.

Pair Corralation between SANTANDER and MT Bank

Assuming the 90 days trading horizon SANTANDER UK 10 is expected to under-perform the MT Bank. But the stock apears to be less risky and, when comparing its historical volatility, SANTANDER UK 10 is 6.08 times less risky than MT Bank. The stock trades about -0.06 of its potential returns per unit of risk. The MT Bank Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,156  in MT Bank Corp on October 6, 2024 and sell it today you would lose (134.00) from holding MT Bank Corp or give up 0.7% of portfolio value over 90 days.

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

SANTANDER UK 10  vs.  MT Bank Corp

SANTANDER UK 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SANTANDER is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MT Bank Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SANTANDER and MT Bank

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

The idea behind SANTANDER UK 10 and MT Bank Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.