Correlation Between Banco Bilbao and Hammer Metals

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

Diversification Opportunities for Banco Bilbao and Hammer Metals

0.0

Correlation Coefficient

Banco Bilbao  Hammer Metals

Pay attention - limited upside

The 3 months correlation between Banco and Hammer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Hammer Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals Limited 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 Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals Limited has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Hammer Metals go up and down completely randomly.

Pair Corralation between Banco Bilbao and Hammer Metals

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to generate 1.39 times more return on investment than Hammer Metals. However, Banco Bilbao is 1.39 times more volatile than Hammer Metals Limited. It trades about 0.11 of its potential returns per unit of risk. Hammer Metals Limited is currently generating about -0.58 per unit of risk. If you would invest  426.00  in Banco Bilbao Viscaya on January 26, 2024 and sell it today you would earn a total of  701.00  from holding Banco Bilbao Viscaya or generate 164.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.61%
Values	Daily Returns

Banco Bilbao Viscaya  vs.  Hammer Metals Limited

Banco Bilbao Viscaya

Risk-Adjusted Performance

23 of 100

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 uncertain basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Hammer Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammer Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hammer Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco Bilbao and Hammer Metals

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

The idea behind Banco Bilbao Viscaya and Hammer Metals 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.