Correlation Between Via Renewables and Northern Trust

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

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

Diversification Opportunities for Via Renewables and Northern Trust

0.7

Correlation Coefficient

Via Renewables  Northern Trust

Poor diversification

The 3 months correlation between Via and Northern is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Via Renewables and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Via Renewables 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 Via Renewables 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 Via Renewables i.e., Via Renewables and Northern Trust go up and down completely randomly.

Pair Corralation between Via Renewables and Northern Trust

Assuming the 90 days horizon Via Renewables is expected to generate 0.52 times more return on investment than Northern Trust. However, Via Renewables is 1.91 times less risky than Northern Trust. It trades about 0.42 of its potential returns per unit of risk. Northern Trust is currently generating about -0.16 per unit of risk. If you would invest  2,222  in Via Renewables on September 28, 2024 and sell it today you would earn a total of  140.00  from holding Via Renewables or generate 6.3% return on investment over 90 days.

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

Via Renewables  vs.  Northern Trust

Via Renewables

Risk-Adjusted Performance

26 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Northern Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Northern Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Via Renewables and Northern Trust

The main advantage of trading using opposite Via Renewables and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Via Renewables 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 Via Renewables 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.