Correlation Between BANCO and Disney

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

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

Diversification Opportunities for BANCO and Disney

0.64

Correlation Coefficient

BANCO  Disney

Poor diversification

The 3 months correlation between BANCO and Disney is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BANCO SANTANDER SA and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and BANCO 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 BANCO SANTANDER SA are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of BANCO i.e., BANCO and Disney go up and down completely randomly.

Pair Corralation between BANCO and Disney

Assuming the 90 days trading horizon BANCO SANTANDER SA is expected to under-perform the Disney. But the bond apears to be less risky and, when comparing its historical volatility, BANCO SANTANDER SA is 3.41 times less risky than Disney. The bond trades about -0.1 of its potential returns per unit of risk. The Walt Disney is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,258  in Walt Disney on October 10, 2024 and sell it today you would earn a total of  1,881  from holding Walt Disney or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.1%
Values	Daily Returns

BANCO SANTANDER SA  vs.  Walt Disney

BANCO SANTANDER SA

Risk-Adjusted Performance

0 of 100

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.

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANCO and Disney

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

The idea behind BANCO SANTANDER SA and Walt Disney 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.