Correlation Between CTEEP Companhia and Banco Santander

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

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

Diversification Opportunities for CTEEP Companhia and Banco Santander

0.3

Correlation Coefficient

CTEEP Companhia  Banco Santander

Weak diversification

The 3 months correlation between CTEEP and Banco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia 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 CTEEP Companhia 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 CTEEP Companhia 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 CTEEP Companhia i.e., CTEEP Companhia and Banco Santander go up and down completely randomly.

Pair Corralation between CTEEP Companhia and Banco Santander

Assuming the 90 days trading horizon CTEEP Companhia is expected to under-perform the Banco Santander. But the preferred stock apears to be less risky and, when comparing its historical volatility, CTEEP Companhia is 1.16 times less risky than Banco Santander. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,119  in Banco Santander SA on December 31, 2024 and sell it today you would earn a total of  183.00  from holding Banco Santander SA or generate 16.35% return on investment over 90 days.

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

CTEEP Companhia  vs.  Banco Santander SA

CTEEP Companhia

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTEEP Companhia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTEEP Companhia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Santander SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Banco Santander unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTEEP Companhia and Banco Santander

The main advantage of trading using opposite CTEEP Companhia and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTEEP Companhia 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 CTEEP Companhia 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.