Correlation Between First Trust and Northern Trust
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and Northern Trust, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Northern Trust.
Diversification Opportunities for First Trust and Northern Trust
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Northern is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and First 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 First Trust Value 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 First Trust i.e., First Trust and Northern Trust go up and down completely randomly.
Pair Corralation between First Trust and Northern Trust
If you would invest 4,129 in First Trust Value on August 29, 2024 and sell it today you would earn a total of 529.00 from holding First Trust Value or generate 12.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
First Trust Value vs. Northern Trust
Performance |
| Timeline |
| First Trust Value |
| Northern Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Trust and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Northern Trust
The main advantage of trading using opposite First Trust and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
| Northern Trust vs. FlexShares Quality Dividend | Northern Trust vs. FlexShares Quality Dividend | Northern Trust vs. FlexShares International Quality | Northern Trust vs. FlexShares International Quality |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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