Correlation Between Loews Corp and Northern Trust
Can any of the company-specific risk be diversified away by investing in both Loews Corp 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 Loews Corp and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loews Corp and Northern Trust, you can compare the effects of market volatilities on Loews Corp 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 Loews Corp with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loews Corp and Northern Trust.
Diversification Opportunities for Loews Corp and Northern Trust
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Loews and Northern is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Loews Corp 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 Loews Corp 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 Loews Corp i.e., Loews Corp and Northern Trust go up and down completely randomly.
Pair Corralation between Loews Corp and Northern Trust
Taking into account the 90-day investment horizon Loews Corp is expected to generate 1.08 times less return on investment than Northern Trust. In addition to that, Loews Corp is 1.24 times more volatile than Northern Trust. It trades about 0.19 of its total potential returns per unit of risk. Northern Trust is currently generating about 0.25 per unit of volatility. If you would invest 10,188 in Northern Trust on August 27, 2024 and sell it today you would earn a total of 758.00 from holding Northern Trust or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loews Corp vs. Northern Trust
Performance |
| Timeline |
| Loews Corp |
| Northern Trust |
Loews Corp and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loews Corp and Northern Trust
The main advantage of trading using opposite Loews Corp and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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.| Loews Corp vs. Horace Mann Educators | Loews Corp vs. Global Indemnity PLC | Loews Corp vs. Selective Insurance Group | Loews Corp vs. Kemper |
| Northern Trust vs. Bank of New | Northern Trust vs. Invesco Plc | Northern Trust vs. Franklin Resources | Northern Trust vs. T Rowe Price |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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