Correlation Between NatWest Group and Elementis PLC
Can any of the company-specific risk be diversified away by investing in both NatWest Group and Elementis 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 Elementis 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 Elementis PLC, you can compare the effects of market volatilities on NatWest Group and Elementis 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 Elementis PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and Elementis PLC.
Diversification Opportunities for NatWest Group and Elementis PLC
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NatWest and Elementis is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and Elementis PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elementis 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 Elementis PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elementis PLC has no effect on the direction of NatWest Group i.e., NatWest Group and Elementis PLC go up and down completely randomly.
Pair Corralation between NatWest Group and Elementis PLC
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 0.78 times more return on investment than Elementis PLC. However, NatWest Group PLC is 1.28 times less risky than Elementis PLC. It trades about 0.23 of its potential returns per unit of risk. Elementis PLC is currently generating about -0.1 per unit of risk. If you would invest 36,450 in NatWest Group PLC on August 30, 2024 and sell it today you would earn a total of 2,800 from holding NatWest Group PLC or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NatWest Group PLC vs. Elementis PLC
Performance |
| Timeline |
| NatWest Group PLC |
| Elementis PLC |
NatWest Group and Elementis PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and Elementis PLC
The main advantage of trading using opposite NatWest Group and Elementis PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, Elementis 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 Elementis PLC will offset losses from the drop in Elementis PLC's long position.| NatWest Group vs. XLMedia PLC | NatWest Group vs. Pentair PLC | NatWest Group vs. Amedeo Air Four | NatWest Group vs. Systemair AB |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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