Correlation Between Banco Do and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Banco Do 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 Banco Do and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco do Estado and Banco Santander SA, you can compare the effects of market volatilities on Banco Do 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 Banco Do with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Banco Santander.
Diversification Opportunities for Banco Do and Banco Santander
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banco and Banco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA and Banco Do 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 do Estado 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 SA has no effect on the direction of Banco Do i.e., Banco Do and Banco Santander go up and down completely randomly.
Pair Corralation between Banco Do and Banco Santander
Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.88 times more return on investment than Banco Santander. However, Banco do Estado is 1.13 times less risky than Banco Santander. It trades about -0.08 of its potential returns per unit of risk. Banco Santander SA is currently generating about -0.25 per unit of risk. If you would invest 1,122 in Banco do Estado on August 28, 2024 and sell it today you would lose (25.00) from holding Banco do Estado or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Banco Santander SA
Performance |
| Timeline |
| Banco do Estado |
| Banco Santander SA |
Banco Do and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Banco Santander
The main advantage of trading using opposite Banco Do and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do 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.| Banco Do vs. Banco Alfa de | Banco Do vs. Banestes SA | Banco Do vs. Banco da Amaznia | Banco Do vs. Financeira Alfa SA |
| Banco Santander vs. Banco do Estado | Banco Santander vs. Banco do Estado | Banco Santander vs. Banco da Amaznia | Banco Santander vs. BRB Banco de |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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