Correlation Between SANTANDER and Porvair Plc

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

Diversification Opportunities for SANTANDER and Porvair Plc

-0.39

Correlation Coefficient

SANTANDER  Porvair Plc

Very good diversification

The 3 months correlation between SANTANDER and Porvair is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of SANTANDER i.e., SANTANDER and Porvair Plc go up and down completely randomly.

Pair Corralation between SANTANDER and Porvair Plc

Assuming the 90 days trading horizon SANTANDER UK 8 is expected to generate 0.2 times more return on investment than Porvair Plc. However, SANTANDER UK 8 is 5.02 times less risky than Porvair Plc. It trades about 0.14 of its potential returns per unit of risk. Porvair plc is currently generating about -0.02 per unit of risk. If you would invest  13,219  in SANTANDER UK 8 on December 24, 2024 and sell it today you would earn a total of  481.00  from holding SANTANDER UK 8 or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

SANTANDER UK 8  vs.  Porvair plc

SANTANDER UK 8

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SANTANDER UK 8 are ranked lower than 11 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Porvair plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porvair plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Porvair Plc 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 Porvair Plc

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

The idea behind SANTANDER UK 8 and Porvair plc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..