Correlation Between Pepco Group and Santander Bank
Can any of the company-specific risk be diversified away by investing in both Pepco Group and Santander Bank 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 Pepco Group and Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pepco Group BV and Santander Bank Polska, you can compare the effects of market volatilities on Pepco Group and Santander Bank 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 Pepco Group with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepco Group and Santander Bank.
Diversification Opportunities for Pepco Group and Santander Bank
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pepco and Santander is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Pepco Group 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 Pepco Group BV are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Pepco Group i.e., Pepco Group and Santander Bank go up and down completely randomly.
Pair Corralation between Pepco Group and Santander Bank
Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the Santander Bank. In addition to that, Pepco Group is 1.6 times more volatile than Santander Bank Polska. It trades about -0.06 of its total potential returns per unit of risk. Santander Bank Polska is currently generating about 0.06 per unit of volatility. If you would invest 32,586 in Santander Bank Polska on August 28, 2024 and sell it today you would earn a total of 11,974 from holding Santander Bank Polska or generate 36.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pepco Group BV vs. Santander Bank Polska
Performance |
| Timeline |
| Pepco Group BV |
| Santander Bank Polska |
Pepco Group and Santander Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pepco Group and Santander Bank
The main advantage of trading using opposite Pepco Group and Santander Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepco Group position performs unexpectedly, Santander Bank 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 Santander Bank will offset losses from the drop in Santander Bank's long position.| Pepco Group vs. Asseco Business Solutions | Pepco Group vs. Detalion Games SA | Pepco Group vs. Asseco South Eastern | Pepco Group vs. Movie Games 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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