Correlation Between Banco Santander and MP Materials
Can any of the company-specific risk be diversified away by investing in both Banco Santander and MP Materials 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 Santander and MP Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander Chile and MP Materials Corp, you can compare the effects of market volatilities on Banco Santander and MP Materials 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 Santander with a short position of MP Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and MP Materials.
Diversification Opportunities for Banco Santander and MP Materials
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Banco and M2PM34 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp and Banco Santander 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 Chile are associated (or correlated) with MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of Banco Santander i.e., Banco Santander and MP Materials go up and down completely randomly.
Pair Corralation between Banco Santander and MP Materials
Assuming the 90 days trading horizon Banco Santander Chile is expected to under-perform the MP Materials. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander Chile is 7.36 times less risky than MP Materials. The stock trades about -0.26 of its potential returns per unit of risk. The MP Materials Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,368 in MP Materials Corp on October 11, 2024 and sell it today you would lose (19.00) from holding MP Materials Corp or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander Chile vs. MP Materials Corp
Performance |
| Timeline |
| Banco Santander Chile |
| MP Materials Corp |
Banco Santander and MP Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and MP Materials
The main advantage of trading using opposite Banco Santander and MP Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, MP Materials 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 MP Materials will offset losses from the drop in MP Materials' long position.| Banco Santander vs. Air Products and | Banco Santander vs. Molson Coors Beverage | Banco Santander vs. Telecomunicaes Brasileiras SA | Banco Santander vs. Ryanair Holdings plc |
| MP Materials vs. Taiwan Semiconductor Manufacturing | MP Materials vs. Apple Inc | MP Materials vs. Alibaba Group Holding | MP Materials vs. Banco Santander Chile |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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