Correlation Between Northern Trust and EQT AB

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Can any of the company-specific risk be diversified away by investing in both Northern Trust and EQT AB 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 EQT AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and EQT AB, you can compare the effects of market volatilities on Northern Trust and EQT AB 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 EQT AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and EQT AB.

Diversification Opportunities for Northern Trust and EQT AB

NorthernEQTDiversified AwayNorthernEQTDiversified Away100%
0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Northern and EQT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and EQT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT AB 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 EQT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT AB has no effect on the direction of Northern Trust i.e., Northern Trust and EQT AB go up and down completely randomly.

Pair Corralation between Northern Trust and EQT AB

Assuming the 90 days horizon Northern Trust is expected to generate 2.61 times less return on investment than EQT AB. But when comparing it to its historical volatility, Northern Trust is 1.47 times less risky than EQT AB. It trades about 0.04 of its potential returns per unit of risk. EQT AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,584  in EQT AB on November 19, 2024 and sell it today you would earn a total of  1,651  from holding EQT AB or generate 104.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Northern Trust  vs.  EQT AB

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015202530
JavaScript chart by amCharts 3.21.15NT4 6EQ
       Timeline  
Northern Trust 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9698100102104106108110
EQT AB 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in EQT AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EQT AB reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb242526272829303132

Northern Trust and EQT AB Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.36-3.26-2.17-1.080.01931.142.33.454.61 0.050.100.150.20
JavaScript chart by amCharts 3.21.15NT4 6EQ
       Returns  

Pair Trading with Northern Trust and EQT AB

The main advantage of trading using opposite Northern Trust and EQT AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, EQT AB 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 EQT AB will offset losses from the drop in EQT AB's long position.
The idea behind Northern Trust and EQT AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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