Correlation Between Binah Capital and Northern Trust

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

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

Diversification Opportunities for Binah Capital and Northern Trust

-0.19

Correlation Coefficient

Binah Capital  Northern Trust

Good diversification

The 3 months correlation between Binah and Northern is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Binah Capital Group, and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Binah Capital 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 Binah Capital Group, 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 Binah Capital i.e., Binah Capital and Northern Trust go up and down completely randomly.

Pair Corralation between Binah Capital and Northern Trust

Assuming the 90 days horizon Binah Capital Group, is expected to generate 20.36 times more return on investment than Northern Trust. However, Binah Capital is 20.36 times more volatile than Northern Trust. It trades about 0.06 of its potential returns per unit of risk. Northern Trust is currently generating about 0.03 per unit of risk. If you would invest  6.44  in Binah Capital Group, on December 30, 2024 and sell it today you would lose (1.31) from holding Binah Capital Group, or give up 20.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.9%
Values	Daily Returns

Binah Capital Group,  vs.  Northern Trust

Binah Capital Group,

Risk-Adjusted Performance

Insignificant

Over the last 90 days Binah Capital Group, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Binah Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Northern Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Northern Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Binah Capital and Northern Trust

The main advantage of trading using opposite Binah Capital and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binah Capital 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 Binah Capital Group, 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.