Correlation Between Northern Trust and ProShares
Can any of the company-specific risk be diversified away by investing in both Northern Trust and ProShares 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 ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and ProShares SP 500, you can compare the effects of market volatilities on Northern Trust and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and ProShares.
Diversification Opportunities for Northern Trust and ProShares
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and ProShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Northern Trust i.e., Northern Trust and ProShares go up and down completely randomly.
Pair Corralation between Northern Trust and ProShares
Given the investment horizon of 90 days Northern Trust is expected to generate 1.14 times less return on investment than ProShares. But when comparing it to its historical volatility, Northern Trust is 1.7 times less risky than ProShares. It trades about 0.2 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,423 in ProShares SP 500 on September 1, 2024 and sell it today you would earn a total of 2,095 from holding ProShares SP 500 or generate 47.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 8.04% |
| Values | Daily Returns |
Northern Trust vs. ProShares SP 500
Performance |
| Timeline |
| Northern Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ProShares SP 500 |
Northern Trust and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and ProShares
The main advantage of trading using opposite Northern Trust and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' 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 |
| ProShares vs. Vanguard Total Stock | ProShares vs. SPDR SP 500 | ProShares vs. iShares Core SP | ProShares vs. Vanguard Dividend Appreciation |
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 Stocks Directory module to find actively traded stocks across global markets.
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