Correlation Between State Street and Northern Trust
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and Northern Trust, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Northern Trust.
Diversification Opportunities for State Street and Northern Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Northern is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and State Street 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 State Street 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 State Street i.e., State Street and Northern Trust go up and down completely randomly.
Pair Corralation between State Street and Northern Trust
Considering the 90-day investment horizon State Street is expected to generate 1.07 times less return on investment than Northern Trust. But when comparing it to its historical volatility, State Street Corp is 1.06 times less risky than Northern Trust. It trades about 0.16 of its potential returns per unit of risk. Northern Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 8,066 in Northern Trust on August 24, 2024 and sell it today you would earn a total of 2,828 from holding Northern Trust or generate 35.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. Northern Trust
Performance |
| Timeline |
| State Street Corp |
| Northern Trust |
State Street and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Northern Trust
The main advantage of trading using opposite State Street and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |