Correlation Between Banco Santander and Valneva SE

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

Diversification Opportunities for Banco Santander and Valneva SE

0.87

Correlation Coefficient

Banco Santander  Valneva SE

Very poor diversification

The 3 months correlation between Banco and Valneva is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Valneva SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valneva SE 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 Valneva SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valneva SE has no effect on the direction of Banco Santander i.e., Banco Santander and Valneva SE go up and down completely randomly.

Pair Corralation between Banco Santander and Valneva SE

Assuming the 90 days trading horizon Banco Santander is expected to generate 1.43 times less return on investment than Valneva SE. But when comparing it to its historical volatility, Banco Santander SA is 2.75 times less risky than Valneva SE. It trades about 0.28 of its potential returns per unit of risk. Valneva SE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Valneva SE on December 30, 2024 and sell it today you would earn a total of  115.00  from holding Valneva SE or generate 54.76% return on investment over 90 days.

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

Banco Santander SA  vs.  Valneva SE

Banco Santander SA

Risk-Adjusted Performance

Solid

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Banco Santander demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Valneva SE

Risk-Adjusted Performance

Good

Over the last 90 days Valneva SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Valneva SE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Santander and Valneva SE

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

The idea behind Banco Santander SA and Valneva SE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.