Correlation Between Bankinter and Caixabank

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

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

Diversification Opportunities for Bankinter and Caixabank

0.43

Correlation Coefficient

Bankinter  Caixabank

Very weak diversification

The 3 months correlation between Bankinter and Caixabank is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter SA ADR and Caixabank SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA ADR and Bankinter 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 Bankinter SA ADR are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA ADR has no effect on the direction of Bankinter i.e., Bankinter and Caixabank go up and down completely randomly.

Pair Corralation between Bankinter and Caixabank

Assuming the 90 days horizon Bankinter SA ADR is expected to under-perform the Caixabank. In addition to that, Bankinter is 1.35 times more volatile than Caixabank SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Caixabank SA ADR is currently generating about -0.04 per unit of volatility. If you would invest  190.00  in Caixabank SA ADR on August 31, 2024 and sell it today you would lose (12.00) from holding Caixabank SA ADR or give up 6.32% of portfolio value over 90 days.

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

Bankinter SA ADR  vs.  Caixabank SA ADR

Bankinter SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankinter SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Caixabank SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Caixabank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bankinter and Caixabank

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

The idea behind Bankinter SA ADR and Caixabank SA ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.