Correlation Between NatWest Group and PureTech Health
Can any of the company-specific risk be diversified away by investing in both NatWest Group and PureTech Health 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 PureTech Health 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 PureTech Health plc, you can compare the effects of market volatilities on NatWest Group and PureTech Health 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 PureTech Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and PureTech Health.
Diversification Opportunities for NatWest Group and PureTech Health
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NatWest and PureTech is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group PLC and PureTech Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureTech Health 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 PureTech Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureTech Health plc has no effect on the direction of NatWest Group i.e., NatWest Group and PureTech Health go up and down completely randomly.
Pair Corralation between NatWest Group and PureTech Health
Assuming the 90 days trading horizon NatWest Group PLC is expected to generate 0.35 times more return on investment than PureTech Health. However, NatWest Group PLC is 2.89 times less risky than PureTech Health. It trades about -0.08 of its potential returns per unit of risk. PureTech Health plc is currently generating about -0.3 per unit of risk. If you would invest 41,520 in NatWest Group PLC on October 9, 2024 and sell it today you would lose (550.00) from holding NatWest Group PLC or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NatWest Group PLC vs. PureTech Health plc
Performance |
| Timeline |
| NatWest Group PLC |
| PureTech Health plc |
NatWest Group and PureTech Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NatWest Group and PureTech Health
The main advantage of trading using opposite NatWest Group and PureTech Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest Group position performs unexpectedly, PureTech Health 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 PureTech Health will offset losses from the drop in PureTech Health's long position.| NatWest Group vs. Zoom Video Communications | NatWest Group vs. Zegona Communications Plc | NatWest Group vs. Samsung Electronics Co | NatWest Group vs. Alliance Data Systems |
| PureTech Health vs. Batm Advanced Communications | PureTech Health vs. Telecom Italia SpA | PureTech Health vs. Cizzle Biotechnology Holdings | PureTech Health vs. JPMorgan Japanese Investment |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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