Correlation Between Northern Trust and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Northern Trust and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and Northern Lights, you can compare the effects of market volatilities on Northern Trust and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and Northern Lights.
Diversification Opportunities for Northern Trust and Northern Lights
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Northern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Northern Trust i.e., Northern Trust and Northern Lights go up and down completely randomly.
Pair Corralation between Northern Trust and Northern Lights
If you would invest 3,189 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 406.00 from holding Northern Lights or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
Northern Trust vs. Northern Lights
Performance |
| Timeline |
| Northern Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Northern Lights |
Northern Trust and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and Northern Lights
The main advantage of trading using opposite Northern Trust and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, Northern Lights 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 Lights will offset losses from the drop in Northern Lights' long position.| Northern Trust vs. FlexShares Quality Dividend | Northern Trust vs. FlexShares Quality Dividend | Northern Trust vs. FlexShares International Quality | Northern Trust vs. FlexShares International Quality |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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