Correlation Between Nationwide Building and Third Point

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

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

Diversification Opportunities for Nationwide Building and Third Point

0.15

Correlation Coefficient

Nationwide Building  Third Point

Average diversification

The 3 months correlation between Nationwide and Third is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Building Society and Third Point Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Point Investors and Nationwide Building 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 Nationwide Building Society are associated (or correlated) with Third Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Point Investors has no effect on the direction of Nationwide Building i.e., Nationwide Building and Third Point go up and down completely randomly.

Pair Corralation between Nationwide Building and Third Point

Assuming the 90 days trading horizon Nationwide Building is expected to generate 809.0 times less return on investment than Third Point. But when comparing it to its historical volatility, Nationwide Building Society is 7.38 times less risky than Third Point. It trades about 0.0 of its potential returns per unit of risk. Third Point Investors is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  176,750  in Third Point Investors on April 20, 2025 and sell it today you would earn a total of  8,500  from holding Third Point Investors or generate 4.81% return on investment over 90 days.

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

Nationwide Building Society  vs.  Third Point Investors

Nationwide Building

Risk-Adjusted Performance

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.

Third Point Investors

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Third Point Investors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Third Point 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 Nationwide Building and Third Point

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

The idea behind Nationwide Building Society and Third Point Investors 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.