Correlation Between Dow Jones and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Banco Santander SA, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Banco Santander.
Diversification Opportunities for Dow Jones and Banco Santander
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Banco is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Banco Santander go up and down completely randomly.
Pair Corralation between Dow Jones and Banco Santander
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.1 times less return on investment than Banco Santander. But when comparing it to its historical volatility, Dow Jones Industrial is 2.74 times less risky than Banco Santander. It trades about 0.12 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,917 in Banco Santander SA on September 14, 2024 and sell it today you would earn a total of 1,059 from holding Banco Santander SA or generate 55.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.53% |
| Values | Daily Returns |
Dow Jones Industrial vs. Banco Santander SA
Performance |
| Timeline |
Dow Jones and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Banco Santander SA
Pair trading matchups for Banco Santander
Pair Trading with Dow Jones and Banco Santander
The main advantage of trading using opposite Dow Jones and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
| Banco Santander vs. Lupatech SA | Banco Santander vs. Brpr Corporate Offices | Banco Santander vs. Charter Communications | Banco Santander vs. Bio Techne |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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