Correlation Between Medallion Bank and Northern Trust

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

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

Diversification Opportunities for Medallion Bank and Northern Trust

-0.45

Correlation Coefficient

Medallion Bank  Northern Trust

Very good diversification

The 3 months correlation between Medallion and Northern is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Bank PR and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Medallion Bank 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 Medallion Bank PR 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 Medallion Bank i.e., Medallion Bank and Northern Trust go up and down completely randomly.

Pair Corralation between Medallion Bank and Northern Trust

Assuming the 90 days horizon Medallion Bank PR is expected to generate 0.78 times more return on investment than Northern Trust. However, Medallion Bank PR is 1.28 times less risky than Northern Trust. It trades about 0.05 of its potential returns per unit of risk. Northern Trust is currently generating about -0.11 per unit of risk. If you would invest  2,460  in Medallion Bank PR on October 9, 2024 and sell it today you would earn a total of  65.00  from holding Medallion Bank PR or generate 2.64% return on investment over 90 days.

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

Medallion Bank PR  vs.  Northern Trust

Medallion Bank PR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Bank PR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Medallion Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Northern Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Preferred Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Medallion Bank and Northern Trust

The main advantage of trading using opposite Medallion Bank and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medallion Bank 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 Medallion Bank PR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.