With four rounds remaining in the competition, the champions trail Los Blancos by four points and Zinedine Zidane's side also will have the edge if the two teams finish level, courtesy of their superior head-to-head record in the two Clasico clashes this season.
Asked on Tuesday if he thought Barca could still come out on top, Setien said: "Of course we can win it.
"The reality and the maths prove it. It's not easy, but we have to keep our hope until the final day.
"We don't have to think about what our rivals do, but concentrate on what we do."
And the 61-year-old added that, whatever happens in LaLiga over the next four games will be useful preparation for the Champions League in August.
"If it's not in this competition, then all we do will help us for the next one, which is also important," he said.
Barcelona are at home to Espanyol in a Catalan derby at Camp Nou on Wednesday.