Correlation Between Gap, and NORTHERN

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Can any of the company-specific risk be diversified away by investing in both Gap, and NORTHERN 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 Gap, and NORTHERN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap, and NORTHERN TRUST PORATION, you can compare the effects of market volatilities on Gap, and NORTHERN 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 Gap, with a short position of NORTHERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and NORTHERN.

Diversification Opportunities for Gap, and NORTHERN

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Gap, and NORTHERN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and NORTHERN TRUST PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN TRUST PORATION and Gap, 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 The Gap, are associated (or correlated) with NORTHERN. 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 PORATION has no effect on the direction of Gap, i.e., Gap, and NORTHERN go up and down completely randomly.

Pair Corralation between Gap, and NORTHERN

Considering the 90-day investment horizon The Gap, is expected to generate 6.15 times more return on investment than NORTHERN. However, Gap, is 6.15 times more volatile than NORTHERN TRUST PORATION. It trades about 0.09 of its potential returns per unit of risk. NORTHERN TRUST PORATION is currently generating about -0.04 per unit of risk. If you would invest  2,147  in The Gap, on October 25, 2024 and sell it today you would earn a total of  317.00  from holding The Gap, or generate 14.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.33%
ValuesDaily Returns

The Gap,  vs.  NORTHERN TRUST PORATION

 Performance 
       Timeline  
Gap, 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.
NORTHERN TRUST PORATION 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NORTHERN TRUST PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORTHERN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Gap, and NORTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gap, and NORTHERN

The main advantage of trading using opposite Gap, and NORTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, position performs unexpectedly, NORTHERN 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 will offset losses from the drop in NORTHERN's long position.
The idea behind The Gap, and NORTHERN TRUST PORATION 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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