Correlation Between Industria and Banco Santander
Can any of the company-specific risk be diversified away by investing in both Industria 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 Industria and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industria de Diseno and Banco Santander, you can compare the effects of market volatilities on Industria 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 Industria with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and Banco Santander.
Diversification Opportunities for Industria and Banco Santander
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Industria and Banco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Banco Santander in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander and Industria 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 Industria de Diseno 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 has no effect on the direction of Industria i.e., Industria and Banco Santander go up and down completely randomly.
Pair Corralation between Industria and Banco Santander
Assuming the 90 days trading horizon Industria de Diseno is expected to generate 0.74 times more return on investment than Banco Santander. However, Industria de Diseno is 1.36 times less risky than Banco Santander. It trades about 0.13 of its potential returns per unit of risk. Banco Santander is currently generating about 0.06 per unit of risk. If you would invest 2,515 in Industria de Diseno on August 28, 2024 and sell it today you would earn a total of 2,787 from holding Industria de Diseno or generate 110.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industria de Diseno vs. Banco Santander
Performance |
| Timeline |
| Industria de Diseno |
| Banco Santander |
Industria and Banco Santander Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industria and Banco Santander
The main advantage of trading using opposite Industria and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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.| Industria vs. Iberdrola SA | Industria vs. Repsol | Industria vs. Banco Santander | Industria vs. ACS Actividades de |
| Banco Santander vs. Repsol | Banco Santander vs. Iberdrola SA | Banco Santander vs. Banco de Sabadell | Banco Santander vs. Caixabank SA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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