Correlation Between BANCO and Weibo Corp

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

Diversification Opportunities for BANCO and Weibo Corp

0.2

Correlation Coefficient

BANCO  Weibo Corp

Modest diversification

The 3 months correlation between BANCO and Weibo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BANCO SANTANDER SA and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of BANCO i.e., BANCO and Weibo Corp go up and down completely randomly.

Pair Corralation between BANCO and Weibo Corp

Assuming the 90 days trading horizon BANCO SANTANDER SA is expected to generate 0.84 times more return on investment than Weibo Corp. However, BANCO SANTANDER SA is 1.2 times less risky than Weibo Corp. It trades about -0.3 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.31 per unit of risk. If you would invest  8,641  in BANCO SANTANDER SA on October 11, 2024 and sell it today you would lose (787.00) from holding BANCO SANTANDER SA or give up 9.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

BANCO SANTANDER SA  vs.  Weibo Corp

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 latest weak 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 BANCO SANTANDER SA investors.

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BANCO and Weibo Corp

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

The idea behind BANCO SANTANDER SA and Weibo Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.