Correlation Between Vodafone Group and SANTANDER

Can any of the company-specific risk be diversified away by investing in both Vodafone Group and SANTANDER 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 Vodafone Group and SANTANDER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vodafone Group PLC and SANTANDER UK 8, you can compare the effects of market volatilities on Vodafone Group and SANTANDER 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 Vodafone Group with a short position of SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and SANTANDER.

Diversification Opportunities for Vodafone Group and SANTANDER

0.06

Correlation Coefficient

Vodafone Group  SANTANDER

Significant diversification

The 3 months correlation between Vodafone and SANTANDER is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and SANTANDER UK 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 8 and Vodafone Group 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 Vodafone Group PLC are associated (or correlated) with SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 8 has no effect on the direction of Vodafone Group i.e., Vodafone Group and SANTANDER go up and down completely randomly.

Pair Corralation between Vodafone Group and SANTANDER

Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the SANTANDER. In addition to that, Vodafone Group is 8.43 times more volatile than SANTANDER UK 8. It trades about -0.08 of its total potential returns per unit of risk. SANTANDER UK 8 is currently generating about -0.01 per unit of volatility. If you would invest  13,566  in SANTANDER UK 8 on September 3, 2024 and sell it today you would lose (16.00) from holding SANTANDER UK 8 or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vodafone Group PLC  vs.  SANTANDER UK 8

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SANTANDER UK 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 8 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SANTANDER is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vodafone Group and SANTANDER

The main advantage of trading using opposite Vodafone Group and SANTANDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group position performs unexpectedly, SANTANDER 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 SANTANDER will offset losses from the drop in SANTANDER's long position.

The idea behind Vodafone Group PLC and SANTANDER UK 8 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.