Correlation Between SANTANDER and Allianz Technology

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

Diversification Opportunities for SANTANDER and Allianz Technology

0.56

Correlation Coefficient

SANTANDER  Allianz Technology

Very weak diversification

The 3 months correlation between SANTANDER and Allianz is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 10 and Allianz Technology Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz Technology Trust 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 Allianz Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz Technology Trust has no effect on the direction of SANTANDER i.e., SANTANDER and Allianz Technology go up and down completely randomly.

Pair Corralation between SANTANDER and Allianz Technology

Assuming the 90 days trading horizon SANTANDER UK 10 is expected to under-perform the Allianz Technology. But the stock apears to be less risky and, when comparing its historical volatility, SANTANDER UK 10 is 11.02 times less risky than Allianz Technology. The stock trades about -0.02 of its potential returns per unit of risk. The Allianz Technology Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  33,900  in Allianz Technology Trust on September 3, 2024 and sell it today you would earn a total of  5,850  from holding Allianz Technology Trust or generate 17.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

SANTANDER UK 10  vs.  Allianz Technology Trust

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.

Allianz Technology Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANTANDER and Allianz Technology

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

The idea behind SANTANDER UK 10 and Allianz Technology Trust 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.