Correlation Between 3i Group and Northern Trust
Can any of the company-specific risk be diversified away by investing in both 3i Group 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 3i Group and Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3i Group plc and Northern Trust, you can compare the effects of market volatilities on 3i Group 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 3i Group with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3i Group and Northern Trust.
Diversification Opportunities for 3i Group and Northern Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TGOPF and Northern is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding 3i Group plc and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and 3i Group 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 3i Group plc 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 3i Group i.e., 3i Group and Northern Trust go up and down completely randomly.
Pair Corralation between 3i Group and Northern Trust
Assuming the 90 days horizon 3i Group plc is expected to generate 0.44 times more return on investment than Northern Trust. However, 3i Group plc is 2.29 times less risky than Northern Trust. It trades about 0.04 of its potential returns per unit of risk. Northern Trust is currently generating about -0.06 per unit of risk. If you would invest 3,564 in 3i Group plc on February 4, 2024 and sell it today you would earn a total of 20.00 from holding 3i Group plc or generate 0.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
3i Group plc vs. Northern Trust
Performance |
Timeline |
3i Group plc |
Northern Trust |
3i Group and Northern Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 3i Group and Northern Trust
The main advantage of trading using opposite 3i Group and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3i Group 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.3i Group vs. Park Lawn | 3i Group vs. Princeton Capital | 3i Group vs. Silver Spike Investment | 3i Group vs. Guardian Capital Group |
Northern Trust vs. Invesco Plc | Northern Trust vs. Franklin Resources | Northern Trust vs. T Rowe Price | Northern Trust vs. SEI Investments |
Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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