Correlation Between Azkoyen and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Azkoyen 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 Azkoyen and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azkoyen and Banco Santander, you can compare the effects of market volatilities on Azkoyen 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 Azkoyen with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azkoyen and Banco Santander.
Diversification Opportunities for Azkoyen and Banco Santander
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Azkoyen and Banco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Azkoyen and Banco Santander in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander and Azkoyen 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 Azkoyen 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 has no effect on the direction of Azkoyen i.e., Azkoyen and Banco Santander go up and down completely randomly.
Pair Corralation between Azkoyen and Banco Santander
Assuming the 90 days trading horizon Azkoyen is expected to generate 11.51 times less return on investment than Banco Santander. But when comparing it to its historical volatility, Azkoyen is 1.5 times less risky than Banco Santander. It trades about 0.01 of its potential returns per unit of risk. Banco Santander is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 427.00 in Banco Santander on November 2, 2024 and sell it today you would earn a total of 76.00 from holding Banco Santander or generate 17.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azkoyen vs. Banco Santander
Performance |
| Timeline |
| Azkoyen |
| Banco Santander |
Azkoyen and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azkoyen and Banco Santander
The main advantage of trading using opposite Azkoyen and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azkoyen 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 Azkoyen and Banco Santander 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. Repsol | Banco Santander vs. Iberdrola SA | Banco Santander vs. Banco de Sabadell | Banco Santander vs. Caixabank SA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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