Correlation Between Banco Santander and Microsoft

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

Diversification Opportunities for Banco Santander and Microsoft

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Banco and Microsoft is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Banco Santander i.e., Banco Santander and Microsoft go up and down completely randomly.

Pair Corralation between Banco Santander and Microsoft

Considering the 90-day investment horizon Banco Santander SA is expected to generate 1.18 times more return on investment than Microsoft. However, Banco Santander is 1.18 times more volatile than Microsoft. It trades about 0.08 of its potential returns per unit of risk. Microsoft is currently generating about 0.07 per unit of risk. If you would invest  250.00  in Banco Santander SA on December 29, 2023 and sell it today you would earn a total of  234.00  from holding Banco Santander SA or generate 93.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Banco Santander SA  vs.  Microsoft

 Performance 
       Timeline  
Banco Santander SA 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Banco Santander and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Banco Santander and Microsoft

The main advantage of trading using opposite Banco Santander and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
The idea behind Banco Santander SA and Microsoft 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 Stocks Directory module to find actively traded stocks across global markets.

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