Correlation Between CATLIN GROUP and Nationwide Building

Can any of the company-specific risk be diversified away by investing in both CATLIN GROUP and Nationwide Building 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 CATLIN GROUP and Nationwide Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CATLIN GROUP and Nationwide Building Society, you can compare the effects of market volatilities on CATLIN GROUP and Nationwide Building 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 CATLIN GROUP with a short position of Nationwide Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of CATLIN GROUP and Nationwide Building.

Diversification Opportunities for CATLIN GROUP and Nationwide Building

0.52

Correlation Coefficient

CATLIN GROUP  Nationwide Building

Very weak diversification

The 3 months correlation between CATLIN and Nationwide is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and Nationwide Building Society in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Building and CATLIN 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 CATLIN GROUP are associated (or correlated) with Nationwide Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Building has no effect on the direction of CATLIN GROUP i.e., CATLIN GROUP and Nationwide Building go up and down completely randomly.

Pair Corralation between CATLIN GROUP and Nationwide Building

Assuming the 90 days trading horizon CATLIN GROUP is expected to under-perform the Nationwide Building. In addition to that, CATLIN GROUP is 4.09 times more volatile than Nationwide Building Society. It trades about -0.24 of its total potential returns per unit of risk. Nationwide Building Society is currently generating about -0.34 per unit of volatility. If you would invest  13,200  in Nationwide Building Society on October 15, 2024 and sell it today you would lose (100.00) from holding Nationwide Building Society or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CATLIN GROUP   vs.  Nationwide Building Society

CATLIN GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nationwide Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Building Society has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nationwide Building is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CATLIN GROUP and Nationwide Building

The main advantage of trading using opposite CATLIN GROUP and Nationwide Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATLIN GROUP position performs unexpectedly, Nationwide Building 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 Nationwide Building will offset losses from the drop in Nationwide Building's long position.

The idea behind CATLIN GROUP and Nationwide Building Society 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.