Correlation Between UBS Group and Natwest Group

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

By analyzing existing cross correlation between UBS Group AG and Natwest Group PLC, you can compare the effects of market volatilities on UBS Group 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 UBS Group with a short position of Natwest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Group and Natwest Group.

Diversification Opportunities for UBS Group and Natwest Group

0.33

Correlation Coefficient

UBS Group  Natwest Group

Weak diversification

The 3 months correlation between UBS and Natwest is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding UBS Group AG 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 UBS 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 UBS Group AG 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 UBS Group i.e., UBS Group and Natwest Group go up and down completely randomly.

Pair Corralation between UBS Group and Natwest Group

Considering the 90-day investment horizon UBS Group AG is expected to under-perform the Natwest Group. In addition to that, UBS Group is 1.36 times more volatile than Natwest Group PLC. It trades about -0.06 of its total potential returns per unit of risk. Natwest Group PLC is currently generating about 0.13 per unit of volatility. If you would invest  993.00  in Natwest Group PLC on September 27, 2024 and sell it today you would earn a total of  32.00  from holding Natwest Group PLC or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

UBS Group AG  vs.  Natwest Group PLC

UBS Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Natwest Group PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Natwest Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UBS Group and Natwest Group

The main advantage of trading using opposite UBS Group and Natwest Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS Group 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 UBS Group AG 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.