Correlation Between BANCO and 90331HPL1

Can any of the company-specific risk be diversified away by investing in both BANCO and 90331HPL1 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 90331HPL1 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 US BANK NATIONAL, you can compare the effects of market volatilities on BANCO and 90331HPL1 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 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANCO and 90331HPL1.

Diversification Opportunities for BANCO and 90331HPL1

0.52

Correlation Coefficient

BANCO  90331HPL1

Very weak diversification

The 3 months correlation between BANCO and 90331HPL1 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BANCO SANTANDER SA and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL 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 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of BANCO i.e., BANCO and 90331HPL1 go up and down completely randomly.

Pair Corralation between BANCO and 90331HPL1

Assuming the 90 days trading horizon BANCO SANTANDER SA is expected to generate 0.45 times more return on investment than 90331HPL1. However, BANCO SANTANDER SA is 2.21 times less risky than 90331HPL1. It trades about -0.1 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about -0.12 per unit of risk. If you would invest  9,860  in BANCO SANTANDER SA on October 10, 2024 and sell it today you would lose (211.00) from holding BANCO SANTANDER SA or give up 2.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.96%
Values	Daily Returns

BANCO SANTANDER SA  vs.  US BANK NATIONAL

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.

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for US BANK NATIONAL investors.

Pair Trading with BANCO and 90331HPL1

The main advantage of trading using opposite BANCO and 90331HPL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANCO position performs unexpectedly, 90331HPL1 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 90331HPL1 will offset losses from the drop in 90331HPL1's long position.

The idea behind BANCO SANTANDER SA and US BANK NATIONAL 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.