Correlation Between SANTANDER and Verizon Communications

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

By analyzing existing cross correlation between SANTANDER UK 8 and Verizon Communications, you can compare the effects of market volatilities on SANTANDER and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and Verizon Communications.

Diversification Opportunities for SANTANDER and Verizon Communications

0.19

Correlation Coefficient

SANTANDER  Verizon Communications

Average diversification

The 3 months correlation between SANTANDER and Verizon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 8 are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of SANTANDER i.e., SANTANDER and Verizon Communications go up and down completely randomly.

Pair Corralation between SANTANDER and Verizon Communications

Assuming the 90 days trading horizon SANTANDER UK 8 is expected to generate 0.2 times more return on investment than Verizon Communications. However, SANTANDER UK 8 is 5.1 times less risky than Verizon Communications. It trades about -0.17 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.07 per unit of risk. If you would invest  13,650  in SANTANDER UK 8 on October 24, 2024 and sell it today you would lose (350.00) from holding SANTANDER UK 8 or give up 2.56% of portfolio value over 90 days.

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

SANTANDER UK 8  vs.  Verizon Communications

SANTANDER UK 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 8 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SANTANDER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SANTANDER and Verizon Communications

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

The idea behind SANTANDER UK 8 and Verizon Communications 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..