Correlation Between Northern Trust and FlexShares Quality

Can any of the company-specific risk be diversified away by investing in both Northern Trust and FlexShares Quality 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 Quality 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 Quality Dividend, you can compare the effects of market volatilities on Northern Trust and FlexShares Quality 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 Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and FlexShares Quality.

Diversification Opportunities for Northern Trust and FlexShares Quality

-0.09

Correlation Coefficient

Northern Trust  FlexShares Quality

Good diversification

The 3 months correlation between Northern and FlexShares is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and FlexShares Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality 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 Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality has no effect on the direction of Northern Trust i.e., Northern Trust and FlexShares Quality go up and down completely randomly.

Pair Corralation between Northern Trust and FlexShares Quality

If you would invest  7,136  in FlexShares Quality Dividend on October 22, 2024 and sell it today you would earn a total of  16.00  from holding FlexShares Quality Dividend or generate 0.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Northern Trust  vs.  FlexShares Quality Dividend

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 Quality

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Northern Trust and FlexShares Quality

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

The idea behind Northern Trust and FlexShares Quality Dividend 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 Transaction History module to view history of all your transactions and understand their impact on performance.