Correlation Between NatWest Group and Abrdn PLC
Can any of the company-specific risk be diversified away by investing in both NatWest Group and Abrdn PLC 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 NatWest Group and Abrdn PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NatWest Group PLC and Abrdn PLC, you can compare the effects of market volatilities on NatWest Group and Abrdn PLC 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 NatWest Group with a short position of Abrdn PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and Abrdn PLC.
Diversification Opportunities for NatWest Group and Abrdn PLC
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NatWest and Abrdn is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and Abrdn PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abrdn PLC and NatWest Group 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 NatWest Group PLC are associated (or correlated) with Abrdn PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abrdn PLC has no effect on the direction of NatWest Group i.e., NatWest Group and Abrdn PLC go up and down completely randomly.
Pair Corralation between NatWest Group and Abrdn PLC
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 0.85 times more return on investment than Abrdn PLC. However, NatWest Group PLC is 1.17 times less risky than Abrdn PLC. It trades about 0.11 of its potential returns per unit of risk. Abrdn PLC is currently generating about -0.01 per unit of risk. If you would invest 31,964 in NatWest Group PLC on September 1, 2024 and sell it today you would earn a total of 8,306 from holding NatWest Group PLC or generate 25.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NatWest Group PLC vs. Abrdn PLC
Performance |
| Timeline |
| NatWest Group PLC |
| Abrdn PLC |
NatWest Group and Abrdn PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and Abrdn PLC
The main advantage of trading using opposite NatWest Group and Abrdn PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, Abrdn PLC 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 Abrdn PLC will offset losses from the drop in Abrdn PLC's long position.| NatWest Group vs. Southern Copper Corp | NatWest Group vs. Pets at Home | NatWest Group vs. Fortune Brands Home | NatWest Group vs. Blackrock World Mining |
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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 the Stocks Directory module to find actively traded stocks across global markets.
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