Correlation Between Northern Trust and FlexShares International

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

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

Diversification Opportunities for Northern Trust and FlexShares International

-0.81

Correlation Coefficient

Northern Trust  FlexShares International

Pay attention - limited upside

The 3 months correlation between Northern and FlexShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International 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 FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of Northern Trust i.e., Northern Trust and FlexShares International go up and down completely randomly.

Pair Corralation between Northern Trust and FlexShares International

If you would invest  6,109  in Northern Trust on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Northern Trust or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	3.08%
Values	Daily Returns

Northern Trust  vs.  FlexShares International Quali

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 current stock price disarray, may contribute to short-term losses for the investors.

FlexShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares International Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, FlexShares International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northern Trust and FlexShares International

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

The idea behind Northern Trust and FlexShares International Quality 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.