Correlation Between BBVA Banco and Naturgy BAN
Can any of the company-specific risk be diversified away by investing in both BBVA Banco and Naturgy BAN 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 Naturgy BAN 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 Naturgy BAN SA, you can compare the effects of market volatilities on BBVA Banco and Naturgy BAN 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 Naturgy BAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Naturgy BAN.
Diversification Opportunities for BBVA Banco and Naturgy BAN
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BBVA and Naturgy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Naturgy BAN SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy BAN SA 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 Naturgy BAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy BAN SA has no effect on the direction of BBVA Banco i.e., BBVA Banco and Naturgy BAN go up and down completely randomly.
Pair Corralation between BBVA Banco and Naturgy BAN
Assuming the 90 days trading horizon BBVA Banco Frances is expected to generate 1.11 times more return on investment than Naturgy BAN. However, BBVA Banco is 1.11 times more volatile than Naturgy BAN SA. It trades about 0.3 of its potential returns per unit of risk. Naturgy BAN SA is currently generating about 0.12 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 Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. Naturgy BAN SA
Performance |
| Timeline |
| BBVA Banco Frances |
| Naturgy BAN SA |
BBVA Banco and Naturgy BAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and Naturgy BAN
The main advantage of trading using opposite BBVA Banco and Naturgy BAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, Naturgy BAN 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 Naturgy BAN will offset losses from the drop in Naturgy BAN'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 |
| Naturgy BAN vs. Transportadora de Gas | Naturgy BAN vs. Distribuidora de Gas | Naturgy BAN vs. Walmart | Naturgy BAN vs. Central Puerto 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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