Correlation Between NatWest Group and ITV PLC
Can any of the company-specific risk be diversified away by investing in both NatWest Group and ITV 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 ITV 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 ITV PLC, you can compare the effects of market volatilities on NatWest Group and ITV 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 ITV PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and ITV PLC.
Diversification Opportunities for NatWest Group and ITV PLC
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NatWest and ITV is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and ITV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV 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 ITV PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV PLC has no effect on the direction of NatWest Group i.e., NatWest Group and ITV PLC go up and down completely randomly.
Pair Corralation between NatWest Group and ITV PLC
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 0.91 times more return on investment than ITV PLC. However, NatWest Group PLC is 1.1 times less risky than ITV PLC. It trades about 0.11 of its potential returns per unit of risk. ITV 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NatWest Group PLC vs. ITV PLC
Performance |
| Timeline |
| NatWest Group PLC |
| ITV PLC |
NatWest Group and ITV PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and ITV PLC
The main advantage of trading using opposite NatWest Group and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, ITV 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 ITV PLC will offset losses from the drop in ITV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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