Correlation Between Northern Trust and Investor
Can any of the company-specific risk be diversified away by investing in both Northern Trust and Investor 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 Investor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and Investor AB ser, you can compare the effects of market volatilities on Northern Trust and Investor 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 Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and Investor.
Diversification Opportunities for Northern Trust and Investor
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and Investor is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser 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 Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of Northern Trust i.e., Northern Trust and Investor go up and down completely randomly.
Pair Corralation between Northern Trust and Investor
Given the investment horizon of 90 days Northern Trust is expected to generate 1.07 times more return on investment than Investor. However, Northern Trust is 1.07 times more volatile than Investor AB ser. It trades about 0.04 of its potential returns per unit of risk. Investor AB ser is currently generating about 0.03 per unit of risk. If you would invest 7,413 in Northern Trust on January 26, 2024 and sell it today you would earn a total of 1,017 from holding Northern Trust or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Trust vs. Investor AB ser
Performance |
| Timeline |
| Northern Trust |
| Investor AB ser |
Northern Trust and Investor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and Investor
The main advantage of trading using opposite Northern Trust and Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, Investor 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 Investor will offset losses from the drop in Investor's long position.| Northern Trust vs. Invesco Plc | Northern Trust vs. Franklin Resources | Northern Trust vs. T Rowe Price | Northern Trust vs. SEI Investments |
| Investor vs. Starfleet Innotech | Investor vs. Flow Capital Corp | Investor vs. Blackhawk Growth Corp | Investor vs. AGF Management Limited |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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