Correlation Between Northern Trust and Kayne Anderson

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

By analyzing existing cross correlation between Northern Trust and Kayne Anderson MLP, you can compare the effects of market volatilities on Northern Trust and Kayne Anderson 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 Kayne Anderson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and Kayne Anderson.

Diversification Opportunities for Northern Trust and Kayne Anderson

-0.63

Correlation Coefficient

Northern Trust  Kayne Anderson

Excellent diversification

The 3 months correlation between Northern and Kayne is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Kayne Anderson MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kayne Anderson MLP 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 Kayne Anderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kayne Anderson MLP has no effect on the direction of Northern Trust i.e., Northern Trust and Kayne Anderson go up and down completely randomly.

Pair Corralation between Northern Trust and Kayne Anderson

Assuming the 90 days horizon Northern Trust is expected to under-perform the Kayne Anderson. But the preferred stock apears to be less risky and, when comparing its historical volatility, Northern Trust is 1.22 times less risky than Kayne Anderson. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Kayne Anderson MLP is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,057  in Kayne Anderson MLP on September 12, 2024 and sell it today you would earn a total of  229.00  from holding Kayne Anderson MLP or generate 21.67% return on investment over 90 days.

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

Northern Trust  vs.  Kayne Anderson MLP

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 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.

Kayne Anderson MLP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kayne Anderson MLP are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Kayne Anderson displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Trust and Kayne Anderson

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

The idea behind Northern Trust and Kayne Anderson MLP 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.