Correlation Between Banco Santander and EDreams Odigeo

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

By analyzing existing cross correlation between Banco Santander and eDreams Odigeo SA, you can compare the effects of market volatilities on Banco Santander and EDreams Odigeo 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 Santander with a short position of EDreams Odigeo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and EDreams Odigeo.

Diversification Opportunities for Banco Santander and EDreams Odigeo

-0.46

Correlation Coefficient

Banco Santander  EDreams Odigeo

Very good diversification

The 3 months correlation between Banco and EDreams is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander and eDreams Odigeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eDreams Odigeo SA and Banco 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 Banco Santander are associated (or correlated) with EDreams Odigeo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eDreams Odigeo SA has no effect on the direction of Banco Santander i.e., Banco Santander and EDreams Odigeo go up and down completely randomly.

Pair Corralation between Banco Santander and EDreams Odigeo

Assuming the 90 days trading horizon Banco Santander is expected to generate 1.07 times more return on investment than EDreams Odigeo. However, Banco Santander is 1.07 times more volatile than eDreams Odigeo SA. It trades about 0.0 of its potential returns per unit of risk. eDreams Odigeo SA is currently generating about 0.0 per unit of risk. If you would invest  440.00  in Banco Santander on August 30, 2024 and sell it today you would lose (2.00) from holding Banco Santander or give up 0.45% of portfolio value over 90 days.

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

Banco Santander  vs.  eDreams Odigeo SA

Banco Santander

Risk-Adjusted Performance

0 of 100

Very Weak

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

eDreams Odigeo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eDreams Odigeo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EDreams Odigeo 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 Santander and EDreams Odigeo

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

The idea behind Banco Santander and eDreams Odigeo SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.