Correlation Between Patria Investments and Northern Trust

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

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

Diversification Opportunities for Patria Investments and Northern Trust

-0.47

Correlation Coefficient

Patria Investments  Northern Trust

Very good diversification

The 3 months correlation between Patria and Northern is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Patria Investments 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 Patria Investments 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 Patria Investments i.e., Patria Investments and Northern Trust go up and down completely randomly.

Pair Corralation between Patria Investments and Northern Trust

Considering the 90-day investment horizon Patria Investments is expected to generate 1.55 times more return on investment than Northern Trust. However, Patria Investments is 1.55 times more volatile than Northern Trust. It trades about 0.1 of its potential returns per unit of risk. Northern Trust is currently generating about 0.0 per unit of risk. If you would invest  1,097  in Patria Investments on September 4, 2024 and sell it today you would earn a total of  101.00  from holding Patria Investments or generate 9.21% return on investment over 90 days.

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

Patria Investments  vs.  Northern Trust

Patria Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Patria Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Patria Investments and Northern Trust

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

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.