Correlation Between ABN AMRO and Banco Santander
Can any of the company-specific risk be diversified away by investing in both ABN AMRO 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 ABN AMRO and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABN AMRO Bank and Banco Santander SA, you can compare the effects of market volatilities on ABN AMRO 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 ABN AMRO with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABN AMRO and Banco Santander.
Diversification Opportunities for ABN AMRO and Banco Santander
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABN and Banco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ABN AMRO Bank 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 ABN AMRO 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 ABN AMRO Bank 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 ABN AMRO i.e., ABN AMRO and Banco Santander go up and down completely randomly.
Pair Corralation between ABN AMRO and Banco Santander
Assuming the 90 days horizon ABN AMRO Bank is expected to under-perform the Banco Santander. But the pink sheet apears to be less risky and, when comparing its historical volatility, ABN AMRO Bank is 1.15 times less risky than Banco Santander. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Banco Santander SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 469.00 in Banco Santander SA on September 3, 2024 and sell it today you would lose (7.00) from holding Banco Santander SA or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABN AMRO Bank vs. Banco Santander SA
Performance |
| Timeline |
| ABN AMRO Bank |
| Banco Santander SA |
ABN AMRO and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABN AMRO and Banco Santander
The main advantage of trading using opposite ABN AMRO and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABN AMRO 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.| ABN AMRO vs. Barclays PLC | ABN AMRO vs. Bank of America | ABN AMRO vs. Bank of America | ABN AMRO vs. Banco Bilbao Vizcaya |
| Banco Santander vs. Barclays PLC ADR | Banco Santander vs. ING Group NV | Banco Santander vs. HSBC Holdings PLC | Banco Santander vs. Natwest Group PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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