Correlation Between Citigroup and Banco Santander

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

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

Diversification Opportunities for Citigroup and Banco Santander

-0.43

Correlation Coefficient

Citigroup  Banco Santander

Very good diversification

The 3 months correlation between Citigroup and Banco is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA and Citigroup 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 Citigroup 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 SA has no effect on the direction of Citigroup i.e., Citigroup and Banco Santander go up and down completely randomly.

Pair Corralation between Citigroup and Banco Santander

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Banco Santander. In addition to that, Citigroup is 1.06 times more volatile than Banco Santander SA. It trades about -0.08 of its total potential returns per unit of risk. Banco Santander SA is currently generating about 0.25 per unit of volatility. If you would invest  463.00  in Banco Santander SA on January 4, 2025 and sell it today you would earn a total of  194.00  from holding Banco Santander SA or generate 41.9% return on investment over 90 days.

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

Citigroup  vs.  Banco Santander SA

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Banco Santander SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Banco Santander

The main advantage of trading using opposite Citigroup and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and Banco Santander SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.