Correlation Between SANTANDER and Applied Materials
Can any of the company-specific risk be diversified away by investing in both SANTANDER and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on SANTANDER and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and Applied Materials.
Diversification Opportunities for SANTANDER and Applied Materials
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SANTANDER and Applied is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 10 and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of SANTANDER i.e., SANTANDER and Applied Materials go up and down completely randomly.
Pair Corralation between SANTANDER and Applied Materials
Assuming the 90 days trading horizon SANTANDER UK 10 is expected to generate 0.45 times more return on investment than Applied Materials. However, SANTANDER UK 10 is 2.23 times less risky than Applied Materials. It trades about 0.09 of its potential returns per unit of risk. Applied Materials is currently generating about -0.04 per unit of risk. If you would invest 15,051 in SANTANDER UK 10 on December 26, 2024 and sell it today you would earn a total of 884.00 from holding SANTANDER UK 10 or generate 5.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SANTANDER UK 10 vs. Applied Materials
Performance |
Timeline |
SANTANDER UK 10 |
Applied Materials |
SANTANDER and Applied Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SANTANDER and Applied Materials
The main advantage of trading using opposite SANTANDER and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SANTANDER position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.SANTANDER vs. Systemair AB | SANTANDER vs. Delta Air Lines | SANTANDER vs. Alaska Air Group | SANTANDER vs. Ryanair Holdings plc |
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Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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