Correlation Between Heritage Financial and Banco Santander

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

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

Diversification Opportunities for Heritage Financial and Banco Santander

-0.86

Correlation Coefficient

Heritage Financial  Banco Santander

Pay attention - limited upside

The 3 months correlation between Heritage and Banco is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil and Heritage Financial 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 Heritage Financial are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Brasil has no effect on the direction of Heritage Financial i.e., Heritage Financial and Banco Santander go up and down completely randomly.

Pair Corralation between Heritage Financial and Banco Santander

Given the investment horizon of 90 days Heritage Financial is expected to generate 1.41 times more return on investment than Banco Santander. However, Heritage Financial is 1.41 times more volatile than Banco Santander Brasil. It trades about 0.14 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about -0.21 per unit of risk. If you would invest  2,116  in Heritage Financial on September 12, 2024 and sell it today you would earn a total of  512.00  from holding Heritage Financial or generate 24.2% return on investment over 90 days.

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

Heritage Financial  vs.  Banco Santander Brasil

Heritage Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating 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.

Pair Trading with Heritage Financial and Banco Santander

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

The idea behind Heritage Financial and Banco Santander Brasil 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.