Correlation Between Skyline Investment and Banco Santander

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

By analyzing existing cross correlation between Skyline Investment SA and Banco Santander SA, you can compare the effects of market volatilities on Skyline Investment and Banco Santander 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 Skyline Investment with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skyline Investment and Banco Santander.

Diversification Opportunities for Skyline Investment and Banco Santander

0.2

Correlation Coefficient

Skyline Investment  Banco Santander

Modest diversification

The 3 months correlation between Skyline and Banco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Skyline Investment SA and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA and Skyline Investment 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 Skyline Investment SA are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Skyline Investment i.e., Skyline Investment and Banco Santander go up and down completely randomly.

Pair Corralation between Skyline Investment and Banco Santander

Assuming the 90 days trading horizon Skyline Investment SA is expected to generate 2.25 times more return on investment than Banco Santander. However, Skyline Investment is 2.25 times more volatile than Banco Santander SA. It trades about 0.05 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.05 per unit of risk. If you would invest  81.00  in Skyline Investment SA on October 22, 2024 and sell it today you would earn a total of  80.00  from holding Skyline Investment SA or generate 98.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Skyline Investment SA  vs.  Banco Santander SA

Skyline Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyline Investment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Skyline Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Banco Santander SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Banco Santander is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Skyline Investment and Banco Santander

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

The idea behind Skyline Investment SA and Banco Santander SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.