Correlation Between Northern Trust and Carrefour

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

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

Diversification Opportunities for Northern Trust and Carrefour

-0.74

Correlation Coefficient

Northern Trust  Carrefour

Pay attention - limited upside

The 3 months correlation between Northern and Carrefour is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA 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 Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of Northern Trust i.e., Northern Trust and Carrefour go up and down completely randomly.

Pair Corralation between Northern Trust and Carrefour

Assuming the 90 days horizon Northern Trust is expected to generate 1.03 times more return on investment than Carrefour. However, Northern Trust is 1.03 times more volatile than Carrefour SA. It trades about 0.2 of its potential returns per unit of risk. Carrefour SA is currently generating about -0.11 per unit of risk. If you would invest  7,991  in Northern Trust on September 28, 2024 and sell it today you would earn a total of  1,859  from holding Northern Trust or generate 23.26% return on investment over 90 days.

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

Northern Trust  vs.  Carrefour SA

Northern Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northern Trust reported solid returns over the last few months and may actually be approaching a breakup point.

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Northern Trust and Carrefour

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

The idea behind Northern Trust and Carrefour SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.