Correlation Between Banco Santander and JD

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

By analyzing existing cross correlation between Banco Santander SA and JD Inc, you can compare the effects of market volatilities on Banco Santander and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and JD.

Diversification Opportunities for Banco Santander and JD

0.52

Correlation Coefficient

Banco Santander  JD

Very weak diversification

The 3 months correlation between Banco and JD is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc 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 SA are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Banco Santander i.e., Banco Santander and JD go up and down completely randomly.

Pair Corralation between Banco Santander and JD

Assuming the 90 days trading horizon Banco Santander is expected to generate 18.01 times less return on investment than JD. But when comparing it to its historical volatility, Banco Santander SA is 2.45 times less risky than JD. It trades about 0.02 of its potential returns per unit of risk. JD Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,425  in JD Inc on September 3, 2024 and sell it today you would earn a total of  1,095  from holding JD Inc or generate 45.15% return on investment over 90 days.

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

Banco Santander SA  vs.  JD Inc

Banco Santander SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Banco Santander is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

JD Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, JD demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and JD

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

The idea behind Banco Santander SA and JD Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.