Correlation Between Banco Bilbao and XWC

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

Diversification Opportunities for Banco Bilbao and XWC

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Banco and XWC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC 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 XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and XWC go up and down completely randomly.

Pair Corralation between Banco Bilbao and XWC

Given the investment horizon of 90 days Banco Bilbao is expected to generate 32.43 times less return on investment than XWC. But when comparing it to its historical volatility, Banco Bilbao Viscaya is 20.59 times less risky than XWC. It trades about 0.03 of its potential returns per unit of risk. XWC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  22.00  in XWC on August 30, 2022 and sell it today you would lose (18.71)  from holding XWC or give up 85.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy96.89%
ValuesDaily Returns

Banco Bilbao Viscaya  vs.  XWC

 Performance (%) 
       Timeline  
Banco Bilbao Viscaya 
Banco Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco Price Channel

XWC 
XWC Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XWC sustained solid returns over the last few months and may actually be approaching a breakup point.

XWC Price Channel

Banco Bilbao and XWC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Banco Bilbao and XWC

The main advantage of trading using opposite Banco Bilbao and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.
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The idea behind Banco Bilbao Viscaya and XWC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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