Correlation Between Santander Bank and MW Trade
Can any of the company-specific risk be diversified away by investing in both Santander Bank and MW Trade 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 MW Trade 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 MW Trade SA, you can compare the effects of market volatilities on Santander Bank and MW Trade 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 MW Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santander Bank and MW Trade.
Diversification Opportunities for Santander Bank and MW Trade
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Santander and MWT is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Santander Bank Polska and MW Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Trade 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 MW Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Trade SA has no effect on the direction of Santander Bank i.e., Santander Bank and MW Trade go up and down completely randomly.
Pair Corralation between Santander Bank and MW Trade
Assuming the 90 days trading horizon Santander Bank Polska is expected to generate 0.76 times more return on investment than MW Trade. However, Santander Bank Polska is 1.31 times less risky than MW Trade. It trades about -0.05 of its potential returns per unit of risk. MW Trade SA is currently generating about -0.15 per unit of risk. If you would invest 51,000 in Santander Bank Polska on August 31, 2024 and sell it today you would lose (7,280) from holding Santander Bank Polska or give up 14.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Santander Bank Polska vs. MW Trade SA
Performance |
| Timeline |
| Santander Bank Polska |
| MW Trade SA |
Santander Bank and MW Trade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Santander Bank and MW Trade
The main advantage of trading using opposite Santander Bank and MW Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santander Bank position performs unexpectedly, MW Trade 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 MW Trade will offset losses from the drop in MW Trade's long position.The idea behind Santander Bank Polska and MW Trade 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.| MW Trade vs. Investment Friends Capital | MW Trade vs. Asseco Business Solutions | MW Trade vs. Detalion Games SA | MW Trade vs. Asseco South Eastern |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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