Correlation Between Banco Santander and Vale SA
Can any of the company-specific risk be diversified away by investing in both Banco Santander and Vale SA 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 Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander and Vale SA, you can compare the effects of market volatilities on Banco Santander and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Vale SA.
Diversification Opportunities for Banco Santander and Vale SA
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Banco and Vale is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Banco Santander i.e., Banco Santander and Vale SA go up and down completely randomly.
Pair Corralation between Banco Santander and Vale SA
Assuming the 90 days trading horizon Banco Santander is expected to generate 1.0 times more return on investment than Vale SA. However, Banco Santander is 1.0 times more volatile than Vale SA. It trades about -0.03 of its potential returns per unit of risk. Vale SA is currently generating about -0.14 per unit of risk. If you would invest 453.00 in Banco Santander on August 27, 2024 and sell it today you would lose (9.00) from holding Banco Santander or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander vs. Vale SA
Performance |
| Timeline |
| Banco Santander |
| Vale SA |
Banco Santander and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and Vale SA
The main advantage of trading using opposite Banco Santander and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| Banco Santander vs. Repsol | Banco Santander vs. Iberdrola SA | Banco Santander vs. Banco de Sabadell | Banco Santander vs. Caixabank SA |
| Vale SA vs. Squirrel Media SA | Vale SA vs. Labiana Health SA | Vale SA vs. Tier1 Technology SA | Vale SA vs. Inhome Prime Properties |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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