Correlation Between NatWest Group and WEG SA

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

Diversification Opportunities for NatWest Group and WEG SA

0.06

Correlation Coefficient

NatWest Group  WEG SA

Significant diversification

The 3 months correlation between NatWest and WEG is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group plc and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of NatWest Group i.e., NatWest Group and WEG SA go up and down completely randomly.

Pair Corralation between NatWest Group and WEG SA

Assuming the 90 days trading horizon NatWest Group plc is expected to generate 1.16 times more return on investment than WEG SA. However, NatWest Group is 1.16 times more volatile than WEG SA. It trades about 0.08 of its potential returns per unit of risk. WEG SA is currently generating about 0.06 per unit of risk. If you would invest  3,014  in NatWest Group plc on October 15, 2024 and sell it today you would earn a total of  2,638  from holding NatWest Group plc or generate 87.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

NatWest Group plc  vs.  WEG SA

NatWest Group plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NatWest Group plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NatWest Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WEG SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEG SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WEG SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NatWest Group and WEG SA

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

The idea behind NatWest Group plc and WEG SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.