Correlation Between NatWest Group and METISA Metalrgica

Can any of the company-specific risk be diversified away by investing in both NatWest Group and METISA Metalrgica 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 METISA Metalrgica 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 METISA Metalrgica Timboense, you can compare the effects of market volatilities on NatWest Group and METISA Metalrgica 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 METISA Metalrgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and METISA Metalrgica.

Diversification Opportunities for NatWest Group and METISA Metalrgica

-0.14

Correlation Coefficient

NatWest Group  METISA Metalrgica

Good diversification

The 3 months correlation between NatWest and METISA is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group plc and METISA Metalrgica Timboense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METISA Metalrgica 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 METISA Metalrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METISA Metalrgica has no effect on the direction of NatWest Group i.e., NatWest Group and METISA Metalrgica go up and down completely randomly.

Pair Corralation between NatWest Group and METISA Metalrgica

Assuming the 90 days trading horizon NatWest Group plc is expected to generate 0.68 times more return on investment than METISA Metalrgica. However, NatWest Group plc is 1.47 times less risky than METISA Metalrgica. It trades about 0.14 of its potential returns per unit of risk. METISA Metalrgica Timboense is currently generating about 0.08 per unit of risk. If you would invest  5,260  in NatWest Group plc on October 11, 2024 and sell it today you would earn a total of  710.00  from holding NatWest Group plc or generate 13.5% return on investment over 90 days.

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

NatWest Group plc  vs.  METISA Metalrgica Timboense

NatWest Group plc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NatWest Group plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NatWest Group sustained solid returns over the last few months and may actually be approaching a breakup point.

METISA Metalrgica

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NatWest Group and METISA Metalrgica

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

The idea behind NatWest Group plc and METISA Metalrgica Timboense 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..