Correlation Between Banco De and Acerinox
Can any of the company-specific risk be diversified away by investing in both Banco De and Acerinox 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 Banco De and Acerinox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco de Sabadell and Acerinox, you can compare the effects of market volatilities on Banco De and Acerinox 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 Banco De with a short position of Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Acerinox.
Diversification Opportunities for Banco De and Acerinox
Weak diversification
The 3 months correlation between Banco and Acerinox is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Sabadell and Acerinox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox and Banco De 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 Banco de Sabadell are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox has no effect on the direction of Banco De i.e., Banco De and Acerinox go up and down completely randomly.
Pair Corralation between Banco De and Acerinox
Assuming the 90 days trading horizon Banco de Sabadell is expected to generate 1.52 times more return on investment than Acerinox. However, Banco De is 1.52 times more volatile than Acerinox. It trades about 0.09 of its potential returns per unit of risk. Acerinox is currently generating about 0.02 per unit of risk. If you would invest 76.00 in Banco de Sabadell on September 3, 2024 and sell it today you would earn a total of 103.00 from holding Banco de Sabadell or generate 135.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco de Sabadell vs. Acerinox
Performance |
| Timeline |
| Banco de Sabadell |
| Acerinox |
Banco De and Acerinox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco De and Acerinox
The main advantage of trading using opposite Banco De and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.The idea behind Banco de Sabadell and Acerinox 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.| Acerinox vs. ACS Actividades de | Acerinox vs. ArcelorMittal SA | Acerinox vs. Mapfre | Acerinox vs. Ferrovial |
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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