Correlation Between TRON and BANCO

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

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

Diversification Opportunities for TRON and BANCO

-0.08

Correlation Coefficient

TRON  BANCO

Good diversification

The 3 months correlation between TRON and BANCO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding TRON 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 TRON 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 TRON are associated (or correlated) with BANCO. 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 TRON i.e., TRON and BANCO go up and down completely randomly.

Pair Corralation between TRON and BANCO

Assuming the 90 days trading horizon TRON is expected to under-perform the BANCO. In addition to that, TRON is 4.82 times more volatile than BANCO SANTANDER SA. It trades about -0.02 of its total potential returns per unit of risk. BANCO SANTANDER SA is currently generating about -0.07 per unit of volatility. If you would invest  9,081  in BANCO SANTANDER SA on December 23, 2024 and sell it today you would lose (255.00) from holding BANCO SANTANDER SA or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.62%
Values	Daily Returns

TRON  vs.  BANCO SANTANDER SA

TRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TRON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BANCO SANTANDER SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANCO SANTANDER SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TRON and BANCO

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

The idea behind TRON 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.