Correlation Between Banco Santander and Orix Corp

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

Diversification Opportunities for Banco Santander and Orix Corp

0.39

Correlation Coefficient

Banco Santander  Orix Corp

Weak diversification

The 3 months correlation between Banco and Orix is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and Orix Corp Ads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orix Corp Ads 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 Orix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orix Corp Ads has no effect on the direction of Banco Santander i.e., Banco Santander and Orix Corp go up and down completely randomly.

Pair Corralation between Banco Santander and Orix Corp

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the Orix Corp. In addition to that, Banco Santander is 1.3 times more volatile than Orix Corp Ads. It trades about -0.02 of its total potential returns per unit of risk. Orix Corp Ads is currently generating about 0.05 per unit of volatility. If you would invest  7,683  in Orix Corp Ads on September 30, 2024 and sell it today you would earn a total of  3,010  from holding Orix Corp Ads or generate 39.18% return on investment over 90 days.

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

Banco Santander Brasil  vs.  Orix Corp Ads

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 weak 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.

Orix Corp Ads

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Banco Santander and Orix Corp

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

The idea behind Banco Santander Brasil and Orix Corp Ads 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.