Correlation Between CF Bankshares and Natwest Group

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Can any of the company-specific risk be diversified away by investing in both CF Bankshares and Natwest 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 CF Bankshares and Natwest Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Bankshares and Natwest Group PLC, you can compare the effects of market volatilities on CF Bankshares and Natwest 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 CF Bankshares with a short position of Natwest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Bankshares and Natwest Group.

Diversification Opportunities for CF Bankshares and Natwest Group

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between CFBK and Natwest is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and Natwest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natwest Group PLC and CF Bankshares 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 CF Bankshares are associated (or correlated) with Natwest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natwest Group PLC has no effect on the direction of CF Bankshares i.e., CF Bankshares and Natwest Group go up and down completely randomly.

Pair Corralation between CF Bankshares and Natwest Group

Given the investment horizon of 90 days CF Bankshares is expected to under-perform the Natwest Group. In addition to that, CF Bankshares is 1.28 times more volatile than Natwest Group PLC. It trades about -0.01 of its total potential returns per unit of risk. Natwest Group PLC is currently generating about 0.12 per unit of volatility. If you would invest  1,008  in Natwest Group PLC on September 16, 2024 and sell it today you would earn a total of  29.00  from holding Natwest Group PLC or generate 2.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CF Bankshares  vs.  Natwest Group PLC

 Performance 
       Timeline  
CF Bankshares 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.
Natwest Group PLC 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Natwest Group reported solid returns over the last few months and may actually be approaching a breakup point.

CF Bankshares and Natwest Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CF Bankshares and Natwest Group

The main advantage of trading using opposite CF Bankshares and Natwest Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Bankshares position performs unexpectedly, Natwest 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 Natwest Group will offset losses from the drop in Natwest Group's long position.
The idea behind CF Bankshares and Natwest Group PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 CEOs Directory module to screen CEOs from public companies around the world.

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