Correlation Between Santander Bank and Medicofarma Biotech

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

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

Diversification Opportunities for Santander Bank and Medicofarma Biotech

-0.8

Correlation Coefficient

Santander Bank  Medicofarma Biotech

Pay attention - limited upside

The 3 months correlation between Santander and Medicofarma is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Santander Bank Polska and Medicofarma Biotech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicofarma Biotech and Santander Bank 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 Bank Polska are associated (or correlated) with Medicofarma Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicofarma Biotech has no effect on the direction of Santander Bank i.e., Santander Bank and Medicofarma Biotech go up and down completely randomly.

Pair Corralation between Santander Bank and Medicofarma Biotech

Assuming the 90 days trading horizon Santander Bank Polska is expected to generate 0.3 times more return on investment than Medicofarma Biotech. However, Santander Bank Polska is 3.29 times less risky than Medicofarma Biotech. It trades about 0.15 of its potential returns per unit of risk. Medicofarma Biotech SA is currently generating about -0.09 per unit of risk. If you would invest  45,060  in Santander Bank Polska on December 2, 2024 and sell it today you would earn a total of  7,000  from holding Santander Bank Polska or generate 15.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Santander Bank Polska  vs.  Medicofarma Biotech SA

Santander Bank Polska

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Santander Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Medicofarma Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medicofarma Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Santander Bank and Medicofarma Biotech

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

The idea behind Santander Bank Polska and Medicofarma Biotech 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.