Correlation Between Banco Santander and Frequentis

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

By analyzing existing cross correlation between Banco Santander SA and Frequentis AG, you can compare the effects of market volatilities on Banco Santander and Frequentis 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 Frequentis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Frequentis.

Diversification Opportunities for Banco Santander and Frequentis

-0.42

Correlation Coefficient

Banco Santander  Frequentis

Very good diversification

The 3 months correlation between Banco and Frequentis is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Frequentis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequentis AG 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 SA are associated (or correlated) with Frequentis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequentis AG has no effect on the direction of Banco Santander i.e., Banco Santander and Frequentis go up and down completely randomly.

Pair Corralation between Banco Santander and Frequentis

Assuming the 90 days trading horizon Banco Santander SA is expected to generate 0.81 times more return on investment than Frequentis. However, Banco Santander SA is 1.24 times less risky than Frequentis. It trades about 0.03 of its potential returns per unit of risk. Frequentis AG is currently generating about -0.04 per unit of risk. If you would invest  433.00  in Banco Santander SA on September 5, 2024 and sell it today you would earn a total of  10.00  from holding Banco Santander SA or generate 2.31% return on investment over 90 days.

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

Banco Santander SA  vs.  Frequentis AG

Banco Santander SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Banco Santander is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Frequentis AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frequentis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Frequentis is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Banco Santander and Frequentis

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

The idea behind Banco Santander SA and Frequentis AG 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.