Correlation Between Bankinter and Repsol
Can any of the company-specific risk be diversified away by investing in both Bankinter and Repsol 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 Bankinter and Repsol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bankinter and Repsol, you can compare the effects of market volatilities on Bankinter and Repsol 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 Bankinter with a short position of Repsol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Repsol.
Diversification Opportunities for Bankinter and Repsol
Weak diversification
The 3 months correlation between Bankinter and Repsol is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol and Bankinter 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 Bankinter are associated (or correlated) with Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Bankinter i.e., Bankinter and Repsol go up and down completely randomly.
Pair Corralation between Bankinter and Repsol
Assuming the 90 days trading horizon Bankinter is expected to generate 1.43 times more return on investment than Repsol. However, Bankinter is 1.43 times more volatile than Repsol. It trades about 0.1 of its potential returns per unit of risk. Repsol is currently generating about 0.03 per unit of risk. If you would invest 738.00 in Bankinter on August 28, 2024 and sell it today you would earn a total of 28.00 from holding Bankinter or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankinter vs. Repsol
Performance |
| Timeline |
| Bankinter |
| Repsol |
Bankinter and Repsol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankinter and Repsol
The main advantage of trading using opposite Bankinter and Repsol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankinter position performs unexpectedly, Repsol 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 Repsol will offset losses from the drop in Repsol's long position.The idea behind Bankinter and Repsol 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.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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