Correlation Between CEZ As and Banco Santander
Can any of the company-specific risk be diversified away by investing in both CEZ As 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 CEZ As and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ as and Banco Santander SA, you can compare the effects of market volatilities on CEZ As 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 CEZ As with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Banco Santander.
Diversification Opportunities for CEZ As and Banco Santander
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CEZ and Banco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as 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 CEZ As 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 CEZ as 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 CEZ As i.e., CEZ As and Banco Santander go up and down completely randomly.
Pair Corralation between CEZ As and Banco Santander
Assuming the 90 days trading horizon CEZ As is expected to generate 5.36 times less return on investment than Banco Santander. But when comparing it to its historical volatility, CEZ as is 1.03 times less risky than Banco Santander. It trades about 0.01 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,436 in Banco Santander SA on August 28, 2024 and sell it today you would earn a total of 491.00 from holding Banco Santander SA or generate 34.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.43% |
| Values | Daily Returns |
CEZ as vs. Banco Santander SA
Performance |
| Timeline |
| CEZ as |
| Banco Santander SA |
CEZ As and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ As and Banco Santander
The main advantage of trading using opposite CEZ As and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ As 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.The idea behind CEZ as and Banco Santander SA 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.| Banco Santander vs. Igoria Trade SA | Banco Santander vs. Marie Brizard Wine | Banco Santander vs. Live Motion Games | Banco Santander vs. Pixel Crow Games |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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