Correlation Between Banco Bilbao and Optimism

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

Diversification Opportunities for Banco Bilbao and Optimism

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Banco and Optimism is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Optimism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimism 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 Optimism. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimism has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Optimism go up and down completely randomly.

Pair Corralation between Banco Bilbao and Optimism

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to generate 0.12 times more return on investment than Optimism. However, Banco Bilbao Viscaya is 8.46 times less risky than Optimism. It trades about 0.36 of its potential returns per unit of risk. Optimism is currently generating about -0.04 per unit of risk. If you would invest  533.00  in Banco Bilbao Viscaya on September 5, 2022 and sell it today you would earn a total of  56.00  from holding Banco Bilbao Viscaya or generate 10.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Banco Bilbao Viscaya  vs.  Optimism

 Performance (%) 
       Timeline  
Banco Bilbao Viscaya 
Banco Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco Price Channel

Optimism 
Optimism Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Optimism are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optimism sustained solid returns over the last few months and may actually be approaching a breakup point.

Optimism Price Channel

Banco Bilbao and Optimism Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Banco Bilbao and Optimism

The main advantage of trading using opposite Banco Bilbao and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao position performs unexpectedly, Optimism 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 Optimism will offset losses from the drop in Optimism's long position.
Banco Bilbao vs. East West Bancorp
The idea behind Banco Bilbao Viscaya and Optimism 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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