Correlation Between Western Alliance and Banco Santander

Can any of the company-specific risk be diversified away by investing in both Western Alliance and Banco Santander 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 Western Alliance and Banco Santander into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Alliance Bancorporation and Banco Santander Brasil, you can compare the effects of market volatilities on Western Alliance and Banco Santander 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 Western Alliance with a short position of Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and Banco Santander.

Diversification Opportunities for Western Alliance and Banco Santander

0.46

Correlation Coefficient

Western Alliance  Banco Santander

Very weak diversification

The 3 months correlation between Western and Banco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil and Western Alliance 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 Western Alliance Bancorporation are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Brasil has no effect on the direction of Western Alliance i.e., Western Alliance and Banco Santander go up and down completely randomly.

Pair Corralation between Western Alliance and Banco Santander

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 2.59 times more return on investment than Banco Santander. However, Western Alliance is 2.59 times more volatile than Banco Santander Brasil. It trades about 0.03 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.01 per unit of risk. If you would invest  6,156  in Western Alliance Bancorporation on February 1, 2024 and sell it today you would lose (473.00) from holding Western Alliance Bancorporation or give up 7.68% of portfolio value over 90 days.

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

Western Alliance Bancorp.  vs.  Banco Santander Brasil

Western Alliance Ban

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Western Alliance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Banco Santander Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Banco Santander is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Alliance and Banco Santander

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

The idea behind Western Alliance Bancorporation and Banco Santander Brasil 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.