Correlation Between Northern Trust and Komercní Banka

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

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

Diversification Opportunities for Northern Trust and Komercní Banka

0.66

Correlation Coefficient

Northern Trust  Komercní Banka

Poor diversification

The 3 months correlation between Northern and Komercní is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Komercn banka as in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komercn banka as and Northern Trust 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 Northern Trust are associated (or correlated) with Komercní Banka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komercn banka as has no effect on the direction of Northern Trust i.e., Northern Trust and Komercní Banka go up and down completely randomly.

Pair Corralation between Northern Trust and Komercní Banka

Assuming the 90 days horizon Northern Trust is expected to generate 1.2 times more return on investment than Komercní Banka. However, Northern Trust is 1.2 times more volatile than Komercn banka as. It trades about 0.03 of its potential returns per unit of risk. Komercn banka as is currently generating about 0.03 per unit of risk. If you would invest  8,386  in Northern Trust on October 5, 2024 and sell it today you would earn a total of  1,514  from holding Northern Trust or generate 18.05% return on investment over 90 days.

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

Northern Trust  vs.  Komercn banka as

Northern Trust

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Northern Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Northern Trust reported solid returns over the last few months and may actually be approaching a breakup point.

Komercn banka as

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Komercn banka as has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Komercní Banka may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Northern Trust and Komercní Banka

The main advantage of trading using opposite Northern Trust and Komercní Banka positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust position performs unexpectedly, Komercní Banka 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 Komercní Banka will offset losses from the drop in Komercní Banka's long position.

The idea behind Northern Trust and Komercn banka as 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.