Correlation Between Northern Trust and Beneficient Warrant

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

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

Diversification Opportunities for Northern Trust and Beneficient Warrant

-0.17

Correlation Coefficient

Northern Trust  Beneficient Warrant

Good diversification

The 3 months correlation between Northern and Beneficient is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust and Beneficient Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beneficient Warrant 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 Beneficient Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beneficient Warrant has no effect on the direction of Northern Trust i.e., Northern Trust and Beneficient Warrant go up and down completely randomly.

Pair Corralation between Northern Trust and Beneficient Warrant

Given the investment horizon of 90 days Northern Trust is expected to generate 1.18 times less return on investment than Beneficient Warrant. But when comparing it to its historical volatility, Northern Trust is 7.0 times less risky than Beneficient Warrant. It trades about 0.21 of its potential returns per unit of risk. Beneficient Warrant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.99  in Beneficient Warrant on September 12, 2024 and sell it today you would lose (0.11) from holding Beneficient Warrant or give up 11.11% of portfolio value over 90 days.

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

Northern Trust  vs.  Beneficient Warrant

Northern Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Northern Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Beneficient Warrant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beneficient Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Beneficient Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Trust and Beneficient Warrant

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

The idea behind Northern Trust and Beneficient Warrant 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.