Correlation Between SANTANDER and Ecofin Global

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

Diversification Opportunities for SANTANDER and Ecofin Global

0.4

Correlation Coefficient

SANTANDER  Ecofin Global

Very weak diversification

The 3 months correlation between SANTANDER and Ecofin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and Ecofin Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global Utilities 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 Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Utilities has no effect on the direction of SANTANDER i.e., SANTANDER and Ecofin Global go up and down completely randomly.

Pair Corralation between SANTANDER and Ecofin Global

Assuming the 90 days trading horizon SANTANDER is expected to generate 9.05 times less return on investment than Ecofin Global. But when comparing it to its historical volatility, SANTANDER UK 8 is 5.17 times less risky than Ecofin Global. It trades about 0.05 of its potential returns per unit of risk. Ecofin Global Utilities is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,454  in Ecofin Global Utilities on September 4, 2024 and sell it today you would earn a total of  996.00  from holding Ecofin Global Utilities or generate 5.4% return on investment over 90 days.

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

SANTANDER UK 8  vs.  Ecofin Global Utilities

SANTANDER UK 8

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SANTANDER UK 8 are ranked lower than 4 (%) 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.

Ecofin Global Utilities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Global Utilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ecofin Global is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SANTANDER and Ecofin Global

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

The idea behind SANTANDER UK 8 and Ecofin Global Utilities 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.