Correlation Between Banco Santander and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Banco Santander and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander SA and Dow Jones Industrial, you can compare the effects of market volatilities on Banco Santander and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Dow Jones.
Diversification Opportunities for Banco Santander and Dow Jones
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and Dow is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 SA are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Banco Santander i.e., Banco Santander and Dow Jones go up and down completely randomly.
Pair Corralation between Banco Santander and Dow Jones
Assuming the 90 days trading horizon Banco Santander SA is expected to under-perform the Dow Jones. In addition to that, Banco Santander is 1.75 times more volatile than Dow Jones Industrial. It trades about -0.06 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander SA vs. Dow Jones Industrial
Performance |
| Timeline |
Banco Santander and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Banco Santander SA
Pair trading matchups for Banco Santander
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Banco Santander and Dow Jones
The main advantage of trading using opposite Banco Santander and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Banco Santander vs. AGRICULTBK HADR25 YC | Banco Santander vs. The Toronto Dominion Bank | Banco Santander vs. Superior Plus Corp | Banco Santander vs. NMI Holdings |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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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