Correlation Between Carlyle and Northern Trust

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

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

Diversification Opportunities for Carlyle and Northern Trust

0.9

Correlation Coefficient

Carlyle  Northern Trust

Almost no diversification

The 3 months correlation between Carlyle and Northern is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Carlyle 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 Carlyle 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 Carlyle i.e., Carlyle and Northern Trust go up and down completely randomly.

Pair Corralation between Carlyle and Northern Trust

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 1.22 times more return on investment than Northern Trust. However, Carlyle is 1.22 times more volatile than Northern Trust. It trades about 0.07 of its potential returns per unit of risk. Northern Trust is currently generating about 0.03 per unit of risk. If you would invest  2,780  in Carlyle Group on September 23, 2024 and sell it today you would earn a total of  2,242  from holding Carlyle Group or generate 80.65% return on investment over 90 days.

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

Carlyle Group  vs.  Northern Trust

Carlyle Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Northern Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Northern Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carlyle and Northern Trust

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

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.