Correlation Between XLMedia PLC and Northern Trust

Can any of the company-specific risk be diversified away by investing in both XLMedia PLC 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 XLMedia PLC and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XLMedia PLC and Northern Trust, you can compare the effects of market volatilities on XLMedia PLC 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 XLMedia PLC with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of XLMedia PLC and Northern Trust.

Diversification Opportunities for XLMedia PLC and Northern Trust

0.29

Correlation Coefficient

XLMedia PLC  Northern Trust

Modest diversification

The 3 months correlation between XLMedia and Northern is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC i.e., XLMedia PLC and Northern Trust go up and down completely randomly.

Pair Corralation between XLMedia PLC and Northern Trust

Assuming the 90 days horizon XLMedia PLC is expected to under-perform the Northern Trust. In addition to that, XLMedia PLC is 2.87 times more volatile than Northern Trust. It trades about -0.11 of its total potential returns per unit of risk. Northern Trust is currently generating about -0.11 per unit of volatility. If you would invest  10,800  in Northern Trust on December 1, 2024 and sell it today you would lose (300.00) from holding Northern Trust or give up 2.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

XLMedia PLC  vs.  Northern Trust

XLMedia PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Northern Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XLMedia PLC and Northern Trust

The main advantage of trading using opposite XLMedia PLC and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XLMedia PLC 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.

The idea behind XLMedia PLC and Northern Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.