Correlation Between Steel Dynamics and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics 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 Steel Dynamics and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Banco Santander SA, you can compare the effects of market volatilities on Steel Dynamics 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 Steel Dynamics with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Banco Santander.
Diversification Opportunities for Steel Dynamics and Banco Santander
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Banco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics i.e., Steel Dynamics and Banco Santander go up and down completely randomly.
Pair Corralation between Steel Dynamics and Banco Santander
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.9 times less return on investment than Banco Santander. But when comparing it to its historical volatility, Steel Dynamics is 1.91 times less risky than Banco Santander. It trades about 0.11 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 440.00 in Banco Santander SA on December 28, 2024 and sell it today you would earn a total of 276.00 from holding Banco Santander SA or generate 62.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Banco Santander SA
Performance |
Timeline |
Steel Dynamics |
Banco Santander SA |
Steel Dynamics and Banco Santander Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Banco Santander
The main advantage of trading using opposite Steel Dynamics and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics 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.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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