Correlation Between Banco Santander and IBEX 35
Can any of the company-specific risk be diversified away by investing in both Banco Santander and IBEX 35 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 IBEX 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander and IBEX 35 Index, you can compare the effects of market volatilities on Banco Santander and IBEX 35 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 IBEX 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and IBEX 35.
Diversification Opportunities for Banco Santander and IBEX 35
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and IBEX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander and IBEX 35 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX 35 Index 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 IBEX 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX 35 Index has no effect on the direction of Banco Santander i.e., Banco Santander and IBEX 35 go up and down completely randomly.
Pair Corralation between Banco Santander and IBEX 35
Assuming the 90 days trading horizon Banco Santander is expected to under-perform the IBEX 35. In addition to that, Banco Santander is 2.15 times more volatile than IBEX 35 Index. It trades about -0.04 of its total potential returns per unit of risk. IBEX 35 Index is currently generating about -0.06 per unit of volatility. If you would invest 1,181,250 in IBEX 35 Index on August 26, 2024 and sell it today you would lose (15,590) from holding IBEX 35 Index or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander vs. IBEX 35 Index
Performance |
| Timeline |
Banco Santander and IBEX 35 Volatility Contrast
Predicted Return Density |
| Returns |
Banco Santander
Pair trading matchups for Banco Santander
IBEX 35 Index
Pair trading matchups for IBEX 35
Pair Trading with Banco Santander and IBEX 35
The main advantage of trading using opposite Banco Santander and IBEX 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, IBEX 35 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 IBEX 35 will offset losses from the drop in IBEX 35's long position.| Banco Santander vs. Repsol | Banco Santander vs. Iberdrola SA | Banco Santander vs. Banco de Sabadell | Banco Santander vs. Caixabank SA |
| IBEX 35 vs. NH Hoteles | IBEX 35 vs. Atrys Health SL | IBEX 35 vs. Parlem Telecom Companyia | IBEX 35 vs. Technomeca Aerospace 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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