Correlation Between Principal Financial and Northern Trust

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

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

Diversification Opportunities for Principal Financial and Northern Trust

0.61

Correlation Coefficient

Principal Financial  Northern Trust

Poor diversification

The 3 months correlation between Principal and Northern is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Principal Financial 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 Principal Financial Group are associated (or correlated) with Northern Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Trust has no effect on the direction of Principal Financial i.e., Principal Financial and Northern Trust go up and down completely randomly.

Pair Corralation between Principal Financial and Northern Trust

Considering the 90-day investment horizon Principal Financial Group is expected to generate 1.06 times more return on investment than Northern Trust. However, Principal Financial is 1.06 times more volatile than Northern Trust. It trades about 0.22 of its potential returns per unit of risk. Northern Trust is currently generating about 0.12 per unit of risk. If you would invest  8,208  in Principal Financial Group on September 8, 2025 and sell it today you would earn a total of  544.00  from holding Principal Financial Group or generate 6.63% return on investment over 90 days.

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

Principal Financial Group  vs.  Northern Trust

Principal Financial

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Principal Financial may actually be approaching a critical reversion point that can send shares even higher in January 2026.

Northern Trust

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Northern Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Principal Financial and Northern Trust

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

The idea behind Principal Financial Group and Northern Trust 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.