Correlation Between Northern Trust and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both Northern Trust and FlexShares ESG 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 FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and FlexShares ESG Climate, you can compare the effects of market volatilities on Northern Trust and FlexShares ESG 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 FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and FlexShares ESG.
Diversification Opportunities for Northern Trust and FlexShares ESG
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and FlexShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate 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 FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of Northern Trust i.e., Northern Trust and FlexShares ESG go up and down completely randomly.
Pair Corralation between Northern Trust and FlexShares ESG
If you would invest 4,091 in FlexShares ESG Climate on August 26, 2024 and sell it today you would earn a total of 842.00 from holding FlexShares ESG Climate or generate 20.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 0.37% |
| Values | Daily Returns |
Northern Trust vs. FlexShares ESG Climate
Performance |
| Timeline |
| Northern Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| FlexShares ESG Climate |
Northern Trust and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and FlexShares ESG
The main advantage of trading using opposite Northern Trust and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, FlexShares ESG 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 FlexShares ESG will offset losses from the drop in FlexShares ESG's long position.| Northern Trust vs. First Trust Senior | Northern Trust vs. First Trust Low | Northern Trust vs. First Trust Enhanced | Northern Trust vs. First Trust TCW |
| FlexShares ESG vs. Dimensional Core Equity | FlexShares ESG vs. Dimensional Emerging Core | FlexShares ESG vs. Dimensional Targeted Value | FlexShares ESG vs. Dimensional Small Cap |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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