Correlation Between Bankinter and Home Capital

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

By analyzing existing cross correlation between Bankinter and Home Capital Rentals, you can compare the effects of market volatilities on Bankinter and Home Capital 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 Home Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Home Capital.

Diversification Opportunities for Bankinter and Home Capital

-0.15

Correlation Coefficient

Bankinter  Home Capital

Good diversification

The 3 months correlation between Bankinter and Home is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter and Home Capital Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Capital Rentals 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 are associated (or correlated) with Home Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Capital Rentals has no effect on the direction of Bankinter i.e., Bankinter and Home Capital go up and down completely randomly.

Pair Corralation between Bankinter and Home Capital

Assuming the 90 days trading horizon Bankinter is expected to generate 1.45 times more return on investment than Home Capital. However, Bankinter is 1.45 times more volatile than Home Capital Rentals. It trades about 0.0 of its potential returns per unit of risk. Home Capital Rentals is currently generating about -0.12 per unit of risk. If you would invest  772.00  in Bankinter on September 5, 2024 and sell it today you would lose (8.00) from holding Bankinter or give up 1.04% of portfolio value over 90 days.

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

Bankinter  vs.  Home Capital Rentals

Bankinter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankinter has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bankinter is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Capital Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Capital Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bankinter and Home Capital

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

The idea behind Bankinter and Home Capital Rentals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .