Correlation Between SANTANDER and Standard Chartered

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

Diversification Opportunities for SANTANDER and Standard Chartered

-0.71

Correlation Coefficient

SANTANDER  Standard Chartered

Pay attention - limited upside

The 3 months correlation between SANTANDER and Standard is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and Standard Chartered PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Chartered 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 Standard Chartered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Chartered PLC has no effect on the direction of SANTANDER i.e., SANTANDER and Standard Chartered go up and down completely randomly.

Pair Corralation between SANTANDER and Standard Chartered

Assuming the 90 days trading horizon SANTANDER UK 8 is expected to under-perform the Standard Chartered. But the stock apears to be less risky and, when comparing its historical volatility, SANTANDER UK 8 is 5.06 times less risky than Standard Chartered. The stock trades about -0.15 of its potential returns per unit of risk. The Standard Chartered PLC is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  86,580  in Standard Chartered PLC on October 26, 2024 and sell it today you would earn a total of  21,770  from holding Standard Chartered PLC or generate 25.14% return on investment over 90 days.

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

SANTANDER UK 8  vs.  Standard Chartered PLC

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.

Standard Chartered PLC

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Standard Chartered PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Standard Chartered unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANTANDER and Standard Chartered

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

The idea behind SANTANDER UK 8 and Standard Chartered 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.