Correlation Between NatWest Group and Ceres Power
Can any of the company-specific risk be diversified away by investing in both NatWest Group and Ceres Power 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 Ceres Power 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 Ceres Power Holdings, you can compare the effects of market volatilities on NatWest Group and Ceres Power 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 Ceres Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and Ceres Power.
Diversification Opportunities for NatWest Group and Ceres Power
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NatWest and Ceres is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and Ceres Power Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceres Power Holdings 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 Ceres Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceres Power Holdings has no effect on the direction of NatWest Group i.e., NatWest Group and Ceres Power go up and down completely randomly.
Pair Corralation between NatWest Group and Ceres Power
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 0.47 times more return on investment than Ceres Power. However, NatWest Group PLC is 2.11 times less risky than Ceres Power. It trades about 0.28 of its potential returns per unit of risk. Ceres Power Holdings is currently generating about -0.25 per unit of risk. If you would invest 36,770 in NatWest Group PLC on September 1, 2024 and sell it today you would earn a total of 3,500 from holding NatWest Group PLC or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NatWest Group PLC vs. Ceres Power Holdings
Performance |
| Timeline |
| NatWest Group PLC |
| Ceres Power Holdings |
NatWest Group and Ceres Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and Ceres Power
The main advantage of trading using opposite NatWest Group and Ceres Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, Ceres Power 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 Ceres Power will offset losses from the drop in Ceres Power'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 |
| Ceres Power vs. Datagroup SE | Ceres Power vs. Eastman Chemical Co | Ceres Power vs. Ion Beam Applications | Ceres Power vs. Automatic Data Processing |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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