Correlation Between Banco Santander and CD PROJEKT

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

Diversification Opportunities for Banco Santander and CD PROJEKT

-0.04

Correlation Coefficient

Banco Santander  CD PROJEKT

Good diversification

The 3 months correlation between Banco and CDR is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and CD PROJEKT SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD PROJEKT SA 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 CD PROJEKT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD PROJEKT SA has no effect on the direction of Banco Santander i.e., Banco Santander and CD PROJEKT go up and down completely randomly.

Pair Corralation between Banco Santander and CD PROJEKT

Assuming the 90 days trading horizon Banco Santander SA is expected to under-perform the CD PROJEKT. But the stock apears to be less risky and, when comparing its historical volatility, Banco Santander SA is 1.86 times less risky than CD PROJEKT. The stock trades about -0.09 of its potential returns per unit of risk. The CD PROJEKT SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  16,480  in CD PROJEKT SA on September 29, 2024 and sell it today you would earn a total of  2,575  from holding CD PROJEKT SA or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Banco Santander SA  vs.  CD PROJEKT SA

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Banco Santander is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CD PROJEKT SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CD PROJEKT SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CD PROJEKT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco Santander and CD PROJEKT

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

The idea behind Banco Santander SA and CD PROJEKT SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.