Correlation Between Repsol and Bankinter
Can any of the company-specific risk be diversified away by investing in both Repsol and Bankinter 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 Repsol and Bankinter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Repsol and Bankinter, you can compare the effects of market volatilities on Repsol and Bankinter 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 Repsol with a short position of Bankinter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol and Bankinter.
Diversification Opportunities for Repsol and Bankinter
Weak diversification
The 3 months correlation between Repsol and Bankinter is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Bankinter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankinter and Repsol 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 Repsol are associated (or correlated) with Bankinter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankinter has no effect on the direction of Repsol i.e., Repsol and Bankinter go up and down completely randomly.
Pair Corralation between Repsol and Bankinter
Assuming the 90 days trading horizon Repsol is expected to generate 4.82 times less return on investment than Bankinter. But when comparing it to its historical volatility, Repsol is 1.43 times less risky than Bankinter. It trades about 0.03 of its potential returns per unit of risk. Bankinter is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 738.00 in Bankinter on August 28, 2024 and sell it today you would earn a total of 28.00 from holding Bankinter or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Repsol vs. Bankinter
Performance |
| Timeline |
| Repsol |
| Bankinter |
Repsol and Bankinter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Repsol and Bankinter
The main advantage of trading using opposite Repsol and Bankinter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol position performs unexpectedly, Bankinter 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 Bankinter will offset losses from the drop in Bankinter's long position.The idea behind Repsol and Bankinter pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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