Correlation Between Santander Bank and LSI Software
Can any of the company-specific risk be diversified away by investing in both Santander Bank and LSI Software 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 Santander Bank and LSI Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Santander Bank Polska and LSI Software SA, you can compare the effects of market volatilities on Santander Bank and LSI Software 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 Santander Bank with a short position of LSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santander Bank and LSI Software.
Diversification Opportunities for Santander Bank and LSI Software
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Santander and LSI is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Santander Bank Polska and LSI Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Software SA and Santander Bank 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 Santander Bank Polska are associated (or correlated) with LSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Software SA has no effect on the direction of Santander Bank i.e., Santander Bank and LSI Software go up and down completely randomly.
Pair Corralation between Santander Bank and LSI Software
Assuming the 90 days trading horizon Santander Bank is expected to generate 1.9 times less return on investment than LSI Software. But when comparing it to its historical volatility, Santander Bank Polska is 1.2 times less risky than LSI Software. It trades about 0.0 of its potential returns per unit of risk. LSI Software SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,520 in LSI Software SA on August 25, 2024 and sell it today you would lose (20.00) from holding LSI Software SA or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Santander Bank Polska vs. LSI Software SA
Performance |
| Timeline |
| Santander Bank Polska |
| LSI Software SA |
Santander Bank and LSI Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Santander Bank and LSI Software
The main advantage of trading using opposite Santander Bank and LSI Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santander Bank position performs unexpectedly, LSI Software 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 LSI Software will offset losses from the drop in LSI Software's long position.The idea behind Santander Bank Polska and LSI Software SA 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.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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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