Correlation Between Banco Santander and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Banco Santander and Iberdrola 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 Santander and Iberdrola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander and Iberdrola SA, you can compare the effects of market volatilities on Banco Santander and Iberdrola 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 Santander with a short position of Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Iberdrola.
Diversification Opportunities for Banco Santander and Iberdrola
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Banco and Iberdrola is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and Banco Santander 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 Santander are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Banco Santander i.e., Banco Santander and Iberdrola go up and down completely randomly.
Pair Corralation between Banco Santander and Iberdrola
Assuming the 90 days trading horizon Banco Santander is expected to generate 1.55 times more return on investment than Iberdrola. However, Banco Santander is 1.55 times more volatile than Iberdrola SA. It trades about 0.02 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.11 per unit of risk. If you would invest 451.00 in Banco Santander on August 24, 2024 and sell it today you would earn a total of 2.00 from holding Banco Santander or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander vs. Iberdrola SA
Performance |
| Timeline |
| Banco Santander |
| Iberdrola SA |
Banco Santander and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and Iberdrola
The main advantage of trading using opposite Banco Santander and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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