Correlation Between BBVA Banco and Banco Santander
Can any of the company-specific risk be diversified away by investing in both BBVA Banco 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 BBVA Banco and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and Banco Santander Brasil, you can compare the effects of market volatilities on BBVA Banco 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 BBVA Banco with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Banco Santander.
Diversification Opportunities for BBVA Banco and Banco Santander
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BBVA and Banco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil and BBVA Banco 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 BBVA Banco Frances 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 Brasil has no effect on the direction of BBVA Banco i.e., BBVA Banco and Banco Santander go up and down completely randomly.
Pair Corralation between BBVA Banco and Banco Santander
Assuming the 90 days trading horizon BBVA Banco Frances is expected to generate 2.2 times more return on investment than Banco Santander. However, BBVA Banco is 2.2 times more volatile than Banco Santander Brasil. It trades about 0.3 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.24 per unit of risk. If you would invest 667,000 in BBVA Banco Frances on October 20, 2024 and sell it today you would earn a total of 196,000 from holding BBVA Banco Frances or generate 29.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. Banco Santander Brasil
Performance |
| Timeline |
| BBVA Banco Frances |
| Banco Santander Brasil |
BBVA Banco and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and Banco Santander
The main advantage of trading using opposite BBVA Banco and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco 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.| BBVA Banco vs. American Express Co | BBVA Banco vs. QUALCOMM Incorporated | BBVA Banco vs. United States Steel | BBVA Banco vs. Pfizer Inc |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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