Correlation Between NatWest Group and Macfarlane Group
Can any of the company-specific risk be diversified away by investing in both NatWest Group and Macfarlane Group 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 Macfarlane Group 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 Macfarlane Group PLC, you can compare the effects of market volatilities on NatWest Group and Macfarlane Group 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 Macfarlane Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and Macfarlane Group.
Diversification Opportunities for NatWest Group and Macfarlane Group
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between NatWest and Macfarlane is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and Macfarlane Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macfarlane Group 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 Macfarlane Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macfarlane Group PLC has no effect on the direction of NatWest Group i.e., NatWest Group and Macfarlane Group go up and down completely randomly.
Pair Corralation between NatWest Group and Macfarlane Group
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 1.09 times more return on investment than Macfarlane Group. However, NatWest Group is 1.09 times more volatile than Macfarlane Group PLC. It trades about 0.17 of its potential returns per unit of risk. Macfarlane Group PLC is currently generating about 0.02 per unit of risk. If you would invest 18,980 in NatWest Group PLC on November 28, 2024 and sell it today you would earn a total of 26,350 from holding NatWest Group PLC or generate 138.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
NatWest Group PLC vs. Macfarlane Group PLC
Performance |
| Timeline |
| NatWest Group PLC |
| Macfarlane Group PLC |
NatWest Group and Macfarlane Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and Macfarlane Group
The main advantage of trading using opposite NatWest Group and Macfarlane Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, Macfarlane Group 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 Macfarlane Group will offset losses from the drop in Macfarlane Group's long position.| NatWest Group vs. Air Products Chemicals | NatWest Group vs. SBM Offshore NV | NatWest Group vs. Systemair AB | NatWest Group vs. Solstad Offshore ASA |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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