Correlation Between Arch Capital and Northern Trust
Can any of the company-specific risk be diversified away by investing in both Arch Capital 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 Arch Capital and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and Northern Trust, you can compare the effects of market volatilities on Arch Capital 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 Arch Capital with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Northern Trust.
Diversification Opportunities for Arch Capital and Northern Trust
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arch and Northern is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Arch Capital 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 Arch Capital 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 Arch Capital i.e., Arch Capital and Northern Trust go up and down completely randomly.
Pair Corralation between Arch Capital and Northern Trust
Assuming the 90 days horizon Arch Capital is expected to generate 1.96 times less return on investment than Northern Trust. In addition to that, Arch Capital is 1.33 times more volatile than Northern Trust. It trades about 0.03 of its total potential returns per unit of risk. Northern Trust is currently generating about 0.07 per unit of volatility. If you would invest 2,031 in Northern Trust on November 8, 2024 and sell it today you would earn a total of 26.00 from holding Northern Trust or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Arch Capital Group vs. Northern Trust
Performance |
| Timeline |
| Arch Capital Group |
| Northern Trust |
Arch Capital and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Northern Trust
The main advantage of trading using opposite Arch Capital and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital 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.| Arch Capital vs. Athene Holding | Arch Capital vs. The Hartford Financial | Arch Capital vs. Arch Capital Group | Arch Capital vs. Athene Holding |
| Northern Trust vs. Fifth Third Bancorp | Northern Trust vs. First Citizens BancShares | Northern Trust vs. Arch Capital Group | Northern Trust vs. Fifth Third 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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