Correlation Between Banco Bilbao and Banco Santander

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

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

Diversification Opportunities for Banco Bilbao and Banco Santander

0.55

Correlation Coefficient

Banco Bilbao  Banco Santander

Very weak diversification

The 3 months correlation between Banco and Banco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Viscaya are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Banco Santander go up and down completely randomly.

Pair Corralation between Banco Bilbao and Banco Santander

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bilbao Viscaya is 2.22 times less risky than Banco Santander. The stock trades about -0.02 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  483.00  in Banco Santander SA on September 3, 2024 and sell it today you would lose (28.00) from holding Banco Santander SA or give up 5.8% of portfolio value over 90 days.

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

Banco Bilbao Viscaya  vs.  Banco Santander SA

Banco Bilbao Viscaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Viscaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Banco Bilbao is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco Bilbao and Banco Santander

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

The idea behind Banco Bilbao Viscaya and Banco Santander 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.