Correlation Between IShares SP and Northern Trust
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 IShares SP and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and Northern Trust, you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Northern Trust.
Diversification Opportunities for IShares SP and Northern Trust
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Northern is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and IShares SP 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 iShares SP 500 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 IShares SP i.e., IShares SP and Northern Trust go up and down completely randomly.
Pair Corralation between IShares SP and Northern Trust
If you would invest 18,221 in iShares SP 500 on August 29, 2024 and sell it today you would earn a total of 2,329 from holding iShares SP 500 or generate 12.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
iShares SP 500 vs. Northern Trust
Performance |
| Timeline |
| iShares SP 500 |
| Northern Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IShares SP and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Northern Trust
The main advantage of trading using opposite IShares SP and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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