Correlation Between Banco Santander and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Banco Santander and First Bancorp 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 First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander Brasil and First Bancorp, you can compare the effects of market volatilities on Banco Santander and First Bancorp 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and First Bancorp.
Diversification Opportunities for Banco Santander and First Bancorp
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 Brasil are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Banco Santander i.e., Banco Santander and First Bancorp go up and down completely randomly.
Pair Corralation between Banco Santander and First Bancorp
Given the investment horizon of 90 days Banco Santander Brasil is expected to generate 0.81 times more return on investment than First Bancorp. However, Banco Santander Brasil is 1.24 times less risky than First Bancorp. It trades about 0.52 of its potential returns per unit of risk. First Bancorp is currently generating about 0.31 per unit of risk. If you would invest 403.00 in Banco Santander Brasil on November 9, 2024 and sell it today you would earn a total of 78.00 from holding Banco Santander Brasil or generate 19.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Banco Santander Brasil vs. First Bancorp
Performance |
| Timeline |
| Banco Santander Brasil |
| First Bancorp |
Banco Santander and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and First Bancorp
The main advantage of trading using opposite Banco Santander and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Banco Santander vs. Banco De Chile | Banco Santander vs. CrossFirst Bankshares | Banco Santander vs. Banco Bradesco SA | Banco Santander vs. CF Bankshares |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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