Correlation Between UBS Plc and SANTANDER

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

By analyzing existing cross correlation between UBS plc and SANTANDER UK 10, you can compare the effects of market volatilities on UBS Plc and 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 UBS Plc with a short position of SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Plc and SANTANDER.

Diversification Opportunities for UBS Plc and SANTANDER

0.51

Correlation Coefficient

UBS Plc  SANTANDER

Very weak diversification

The 3 months correlation between UBS and SANTANDER is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding UBS plc and SANTANDER UK 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 10 and UBS Plc 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 UBS plc are associated (or correlated) with SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 10 has no effect on the direction of UBS Plc i.e., UBS Plc and SANTANDER go up and down completely randomly.

Pair Corralation between UBS Plc and SANTANDER

Assuming the 90 days trading horizon UBS plc is expected to generate 2.44 times more return on investment than SANTANDER. However, UBS Plc is 2.44 times more volatile than SANTANDER UK 10. It trades about 0.2 of its potential returns per unit of risk. SANTANDER UK 10 is currently generating about 0.02 per unit of risk. If you would invest  837,200  in UBS plc on September 11, 2024 and sell it today you would earn a total of  78,000  from holding UBS plc or generate 9.32% return on investment over 90 days.

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

UBS plc   vs.  SANTANDER UK 10

UBS plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UBS Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SANTANDER UK 10

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SANTANDER UK 10 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SANTANDER is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UBS Plc and SANTANDER

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

The idea behind UBS plc and SANTANDER UK 10 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.