Correlation Between Northern Trust and Caixabank
Can any of the company-specific risk be diversified away by investing in both Northern Trust and Caixabank 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 Northern Trust and Caixabank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and Caixabank SA ADR, you can compare the effects of market volatilities on Northern Trust and Caixabank 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 Northern Trust with a short position of Caixabank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and Caixabank.
Diversification Opportunities for Northern Trust and Caixabank
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Caixabank is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Caixabank SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA ADR and Northern Trust 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 Northern Trust are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA ADR has no effect on the direction of Northern Trust i.e., Northern Trust and Caixabank go up and down completely randomly.
Pair Corralation between Northern Trust and Caixabank
Given the investment horizon of 90 days Northern Trust is expected to under-perform the Caixabank. But the stock apears to be less risky and, when comparing its historical volatility, Northern Trust is 3.92 times less risky than Caixabank. The stock trades about -0.08 of its potential returns per unit of risk. The Caixabank SA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 156.00 in Caixabank SA ADR on January 20, 2024 and sell it today you would earn a total of 13.00 from holding Caixabank SA ADR or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Trust vs. Caixabank SA ADR
Performance |
| Timeline |
| Northern Trust |
| Caixabank SA ADR |
Northern Trust and Caixabank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and Caixabank
The main advantage of trading using opposite Northern Trust and Caixabank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, Caixabank 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 Caixabank will offset losses from the drop in Caixabank's long position.| Northern Trust vs. Bank of New | Northern Trust vs. Invesco Plc | Northern Trust vs. Franklin Resources | Northern Trust vs. T Rowe Price |
| Caixabank vs. Permanent TSB Group | Caixabank vs. Bank of Botetourt | Caixabank vs. Cashmere Valley Bank | Caixabank vs. Oak Valley Bancorp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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