Correlation Between Banco Bilbao and Airbus Group

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

By analyzing existing cross correlation between Banco Bilbao Vizcaya and Airbus Group SE, you can compare the effects of market volatilities on Banco Bilbao and Airbus Group 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 Bilbao with a short position of Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and Airbus Group.

Diversification Opportunities for Banco Bilbao and Airbus Group

-0.06

Correlation Coefficient

Banco Bilbao  Airbus Group

Good diversification

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

Pair Corralation between Banco Bilbao and Airbus Group

Assuming the 90 days trading horizon Banco Bilbao is expected to generate 3.54 times less return on investment than Airbus Group. In addition to that, Banco Bilbao is 1.22 times more volatile than Airbus Group SE. It trades about 0.03 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.15 per unit of volatility. If you would invest  13,226  in Airbus Group SE on September 5, 2024 and sell it today you would earn a total of  1,944  from holding Airbus Group SE or generate 14.7% return on investment over 90 days.

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

Banco Bilbao Vizcaya  vs.  Airbus Group SE

Banco Bilbao Vizcaya

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Banco Bilbao is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Airbus Group SE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Airbus Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bilbao and Airbus Group

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

The idea behind Banco Bilbao Vizcaya and Airbus Group SE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.