Correlation Between Naturgy BAN and BBVA Banco
Can any of the company-specific risk be diversified away by investing in both Naturgy BAN and BBVA Banco 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 Naturgy BAN and BBVA Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naturgy BAN SA and BBVA Banco Frances, you can compare the effects of market volatilities on Naturgy BAN and BBVA Banco 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 Naturgy BAN with a short position of BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naturgy BAN and BBVA Banco.
Diversification Opportunities for Naturgy BAN and BBVA Banco
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Naturgy and BBVA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy BAN SA and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Naturgy BAN 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 Naturgy BAN SA are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Naturgy BAN i.e., Naturgy BAN and BBVA Banco go up and down completely randomly.
Pair Corralation between Naturgy BAN and BBVA Banco
Assuming the 90 days trading horizon Naturgy BAN is expected to generate 2.85 times less return on investment than BBVA Banco. But when comparing it to its historical volatility, Naturgy BAN SA is 1.11 times less risky than BBVA Banco. It trades about 0.12 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 667,000 in BBVA Banco Frances on October 20, 2024 and sell it today you would earn a total of 196,000 from holding BBVA Banco Frances or generate 29.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Naturgy BAN SA vs. BBVA Banco Frances
Performance |
| Timeline |
| Naturgy BAN SA |
| BBVA Banco Frances |
Naturgy BAN and BBVA Banco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naturgy BAN and BBVA Banco
The main advantage of trading using opposite Naturgy BAN and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naturgy BAN position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.| Naturgy BAN vs. Transportadora de Gas | Naturgy BAN vs. Distribuidora de Gas | Naturgy BAN vs. Walmart | Naturgy BAN vs. Central Puerto SA |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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