Correlation Between Bread Financial and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Banco Santander SA, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Banco Santander.
Diversification Opportunities for Bread Financial and Banco Santander
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bread and Banco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings 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 Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Banco Santander go up and down completely randomly.
Pair Corralation between Bread Financial and Banco Santander
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 0.51 times more return on investment than Banco Santander. However, Bread Financial Holdings is 1.95 times less risky than Banco Santander. It trades about 0.62 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.16 per unit of risk. If you would invest 8,192 in Bread Financial Holdings on September 15, 2024 and sell it today you would earn a total of 1,690 from holding Bread Financial Holdings or generate 20.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bread Financial Holdings vs. Banco Santander SA
Performance |
| Timeline |
| Bread Financial Holdings |
| Banco Santander SA |
Bread Financial and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Banco Santander
The main advantage of trading using opposite Bread Financial and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.| Bread Financial vs. PayPal Holdings | Bread Financial vs. Credit Acceptance | Bread Financial vs. Financeira Alfa SA |
| Banco Santander vs. Warner Music Group | Banco Santander vs. Bread Financial Holdings | Banco Santander vs. Take Two Interactive Software | Banco Santander vs. Bank of America |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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