Correlation Between SANTANDER and Schroders Investment

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

Diversification Opportunities for SANTANDER and Schroders Investment

0.24

Correlation Coefficient

SANTANDER  Schroders Investment

Modest diversification

The 3 months correlation between SANTANDER and Schroders is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and Schroders Investment Trusts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroders Investment 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 Schroders Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroders Investment has no effect on the direction of SANTANDER i.e., SANTANDER and Schroders Investment go up and down completely randomly.

Pair Corralation between SANTANDER and Schroders Investment

Assuming the 90 days trading horizon SANTANDER is expected to generate 19.81 times less return on investment than Schroders Investment. But when comparing it to its historical volatility, SANTANDER UK 8 is 4.23 times less risky than Schroders Investment. It trades about 0.03 of its potential returns per unit of risk. Schroders Investment Trusts is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  44,900  in Schroders Investment Trusts on September 5, 2024 and sell it today you would earn a total of  3,400  from holding Schroders Investment Trusts or generate 7.57% return on investment over 90 days.

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

SANTANDER UK 8  vs.  Schroders Investment Trusts

SANTANDER UK 8

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SANTANDER UK 8 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SANTANDER is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Schroders Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schroders Investment Trusts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Schroders Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SANTANDER and Schroders Investment

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

The idea behind SANTANDER UK 8 and Schroders Investment Trusts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.