Correlation Between Banco Santander and Chiba Bank

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

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

Diversification Opportunities for Banco Santander and Chiba Bank

0.43

Correlation Coefficient

Banco Santander  Chiba Bank

Very weak diversification

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

Pair Corralation between Banco Santander and Chiba Bank

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the Chiba Bank. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander Brasil is 1.78 times less risky than Chiba Bank. The stock trades about -0.02 of its potential returns per unit of risk. The Chiba Bank Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,730  in Chiba Bank Ltd on September 28, 2024 and sell it today you would earn a total of  1,038  from holding Chiba Bank Ltd or generate 38.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Banco Santander Brasil  vs.  Chiba Bank Ltd

Banco Santander Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Chiba Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Banco Santander and Chiba Bank

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

The idea behind Banco Santander Brasil and Chiba Bank Ltd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.