Correlation Between Banco Bilbao and Vanguard FTSE

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

Diversification Opportunities for Banco Bilbao and Vanguard FTSE

0.9

Correlation Coefficient

Banco Bilbao  Vanguard FTSE

Almost no diversification

The 3 months correlation between Banco and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Banco Bilbao and Vanguard FTSE

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to under-perform the Vanguard FTSE. In addition to that, Banco Bilbao is 2.17 times more volatile than Vanguard FTSE Europe. It trades about -0.04 of its total potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.06 per unit of volatility. If you would invest  6,695  in Vanguard FTSE Europe on January 24, 2024 and sell it today you would lose (63.00) from holding Vanguard FTSE Europe or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banco Bilbao Viscaya  vs.  Vanguard FTSE Europe

Banco Bilbao Viscaya

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 22 (%) 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.

Vanguard FTSE Europe

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Europe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Banco Bilbao and Vanguard FTSE

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

The idea behind Banco Bilbao Viscaya and Vanguard FTSE Europe 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 CEOs Directory module to screen CEOs from public companies around the world.