Correlation Between Broadcom and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Broadcom and Banco 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 Broadcom and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadcom and Banco Santander SA, you can compare the effects of market volatilities on Broadcom and Banco 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 Broadcom with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and Banco Santander.
Diversification Opportunities for Broadcom and Banco Santander
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Broadcom and Banco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom 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 Broadcom 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 Broadcom are associated (or correlated) with Banco Santander. 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 Broadcom i.e., Broadcom and Banco Santander go up and down completely randomly.
Pair Corralation between Broadcom and Banco Santander
Assuming the 90 days trading horizon Broadcom is expected to generate 1.66 times more return on investment than Banco Santander. However, Broadcom is 1.66 times more volatile than Banco Santander SA. It trades about 0.09 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.03 per unit of risk. If you would invest 13,944 in Broadcom on September 4, 2024 and sell it today you would earn a total of 1,954 from holding Broadcom or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broadcom vs. Banco Santander SA
Performance |
| Timeline |
| Broadcom |
| Banco Santander SA |
Broadcom and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broadcom and Banco Santander
The main advantage of trading using opposite Broadcom and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadcom position performs unexpectedly, Banco 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 Banco Santander will offset losses from the drop in Banco Santander's long position.The idea behind Broadcom 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.| Banco Santander vs. Transport International Holdings | Banco Santander vs. MAVEN WIRELESS SWEDEN | Banco Santander vs. Broadcom | Banco Santander vs. Texas Roadhouse |
Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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