Correlation Between SANTANDER and BH Macro

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

By analyzing existing cross correlation between SANTANDER UK 8 and BH Macro Limited, you can compare the effects of market volatilities on SANTANDER and BH Macro 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 SANTANDER with a short position of BH Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and BH Macro.

Diversification Opportunities for SANTANDER and BH Macro

-0.07

Correlation Coefficient

SANTANDER  BH Macro

Good diversification

The 3 months correlation between SANTANDER and BHMU is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited and 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 SANTANDER UK 8 are associated (or correlated) with BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of SANTANDER i.e., SANTANDER and BH Macro go up and down completely randomly.

Pair Corralation between SANTANDER and BH Macro

Assuming the 90 days trading horizon SANTANDER is expected to generate 1055.0 times less return on investment than BH Macro. But when comparing it to its historical volatility, SANTANDER UK 8 is 6.97 times less risky than BH Macro. It trades about 0.0 of its potential returns per unit of risk. BH Macro Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  385.00  in BH Macro Limited on September 12, 2024 and sell it today you would earn a total of  25.00  from holding BH Macro Limited or generate 6.49% return on investment over 90 days.

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

SANTANDER UK 8  vs.  BH Macro Limited

SANTANDER UK 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 8 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SANTANDER is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BH Macro Limited

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BH Macro Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BH Macro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SANTANDER and BH Macro

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

The idea behind SANTANDER UK 8 and BH Macro Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.