Correlation Between Banco Santander and Telefonica
Can any of the company-specific risk be diversified away by investing in both Banco Santander and Telefonica 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 Telefonica 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 Telefonica SA ADR, you can compare the effects of market volatilities on Banco Santander and Telefonica 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 Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and Telefonica.
Diversification Opportunities for Banco Santander and Telefonica
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banco and Telefonica is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR 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 Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of Banco Santander i.e., Banco Santander and Telefonica go up and down completely randomly.
Pair Corralation between Banco Santander and Telefonica
Considering the 90-day investment horizon Banco Santander SA is expected to generate 1.4 times more return on investment than Telefonica. However, Banco Santander is 1.4 times more volatile than Telefonica SA ADR. It trades about 0.15 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.09 per unit of risk. If you would invest 476.00 in Banco Santander SA on January 25, 2024 and sell it today you would earn a total of 23.00 from holding Banco Santander SA or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Santander SA vs. Telefonica SA ADR
Performance |
| Timeline |
| Banco Santander SA |
| Telefonica SA ADR |
Banco Santander and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Santander and Telefonica
The main advantage of trading using opposite Banco Santander and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica's long position.| Banco Santander vs. Barclays PLC ADR | Banco Santander vs. ING Group NV | Banco Santander vs. HSBC Holdings PLC | Banco Santander vs. Natwest Group PLC |
| Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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