Correlation Between Banco Santander and Merck
Can any of the company-specific risk be diversified away by investing in both Banco Santander and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Santander SA and Merck Company, you can compare the effects of market volatilities on Banco Santander and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Merck.
Diversification Opportunities for Banco Santander and Merck
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banco and Merck is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 SA are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Banco Santander i.e., Banco Santander and Merck go up and down completely randomly.
Pair Corralation between Banco Santander and Merck
Assuming the 90 days trading horizon Banco Santander SA is expected to generate 0.82 times more return on investment than Merck. However, Banco Santander SA is 1.22 times less risky than Merck. It trades about 0.42 of its potential returns per unit of risk. Merck Company is currently generating about -0.37 per unit of risk. If you would invest 479.00 in Banco Santander SA on November 18, 2024 and sell it today you would earn a total of 100.00 from holding Banco Santander SA or generate 20.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander SA vs. Merck Company
Performance |
| Timeline |
| Banco Santander SA |
| Merck Company |
Banco Santander and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and Merck
The main advantage of trading using opposite Banco Santander and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Banco Santander vs. Raiffeisen Bank International | Banco Santander vs. UNIQA Insurance Group | Banco Santander vs. Erste Group Bank | Banco Santander vs. BKS Bank AG |
| Merck vs. SBM Offshore NV | Merck vs. Vienna Insurance Group | Merck vs. UNIQA Insurance Group | Merck vs. Oberbank AG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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