Correlation Between Banco Bilbao and Industrial

Can any of the company-specific risk be diversified away by investing in both Banco Bilbao and Industrial 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 Industrial 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 Industrial and Commercial, you can compare the effects of market volatilities on Banco Bilbao and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and Industrial.

Diversification Opportunities for Banco Bilbao and Industrial

0.17

Correlation Coefficient

Banco Bilbao  Industrial

Average diversification

The 3 months correlation between Banco and Industrial is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Industrial go up and down completely randomly.

Pair Corralation between Banco Bilbao and Industrial

Assuming the 90 days horizon Banco Bilbao Vizcaya is expected to under-perform the Industrial. In addition to that, Banco Bilbao is 1.1 times more volatile than Industrial and Commercial. It trades about -0.05 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.1 per unit of volatility. If you would invest  54.00  in Industrial and Commercial on September 11, 2024 and sell it today you would earn a total of  7.00  from holding Industrial and Commercial or generate 12.96% return on investment over 90 days.

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

Banco Bilbao Vizcaya  vs.  Industrial and Commercial

Banco Bilbao Vizcaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Vizcaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Industrial and Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bilbao and Industrial

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

The idea behind Banco Bilbao Vizcaya and Industrial and Commercial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.