Correlation Between East West and Banco Santander
Can any of the company-specific risk be diversified away by investing in both East West 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 East West and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Bancorp and Banco Santander Chile, you can compare the effects of market volatilities on East West 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 East West with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Banco Santander.
Diversification Opportunities for East West and Banco Santander
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between East and Banco is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile and East West 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 East West Bancorp 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 Chile has no effect on the direction of East West i.e., East West and Banco Santander go up and down completely randomly.
Pair Corralation between East West and Banco Santander
Given the investment horizon of 90 days East West Bancorp is expected to generate 1.98 times more return on investment than Banco Santander. However, East West is 1.98 times more volatile than Banco Santander Chile. It trades about 0.2 of its potential returns per unit of risk. Banco Santander Chile is currently generating about -0.18 per unit of risk. If you would invest 9,509 in East West Bancorp on August 24, 2024 and sell it today you would earn a total of 1,174 from holding East West Bancorp or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Banco Santander Chile
Performance |
| Timeline |
| East West Bancorp |
| Banco Santander Chile |
East West and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Banco Santander
The main advantage of trading using opposite East West and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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.| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
| Banco Santander vs. Bancolombia SA ADR | Banco Santander vs. Banco Bradesco SA | Banco Santander vs. Credicorp | Banco Santander vs. Banco Santander Brasil |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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