Correlation Between Natwest Group and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Natwest Group and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Natwest Group and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natwest Group and Dow Jones.
Diversification Opportunities for Natwest Group and Dow Jones
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Natwest and Dow is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Natwest Group PLC and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Natwest Group i.e., Natwest Group and Dow Jones go up and down completely randomly.
Pair Corralation between Natwest Group and Dow Jones
Considering the 90-day investment horizon Natwest Group PLC is expected to generate 2.61 times more return on investment than Dow Jones. However, Natwest Group is 2.61 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of risk. If you would invest 1,039 in Natwest Group PLC on December 1, 2024 and sell it today you would earn a total of 184.00 from holding Natwest Group PLC or generate 17.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Natwest Group PLC vs. Dow Jones Industrial
Performance |
Timeline |
Natwest Group and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Natwest Group PLC
Pair trading matchups for Natwest Group
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Natwest Group and Dow Jones
The main advantage of trading using opposite Natwest Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natwest Group position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Natwest Group vs. ING Group NV | Natwest Group vs. HSBC Holdings PLC | Natwest Group vs. Banco Santander SA | Natwest Group vs. UBS Group AG |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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