Correlation Between Banco Bilbao and GATX

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Can any of the company-specific risk be diversified away by investing in both Banco Bilbao and GATX 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 Bilbao and GATX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Bilbao Viscaya and GATX Corporation, you can compare the effects of market volatilities on Banco Bilbao and GATX 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 Bilbao with a short position of GATX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and GATX.

Diversification Opportunities for Banco Bilbao and GATX

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Banco and GATX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX and Banco Bilbao 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 Bilbao Viscaya are associated (or correlated) with GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and GATX go up and down completely randomly.

Pair Corralation between Banco Bilbao and GATX

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to generate 1.61 times more return on investment than GATX. However, Banco Bilbao is 1.61 times more volatile than GATX Corporation. It trades about 0.49 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.38 per unit of risk. If you would invest  1,014  in Banco Bilbao Viscaya on December 29, 2023 and sell it today you would earn a total of  170.00  from holding Banco Bilbao Viscaya or generate 16.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Banco Bilbao Viscaya  vs.  GATX Corp.

 Performance 
       Timeline  
Banco Bilbao Viscaya 

Risk-Adjusted Performance

23 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.
GATX 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, GATX may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Banco Bilbao and GATX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Banco Bilbao and GATX

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

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