Correlation Between ConnectOne Bancorp and Northrim BanCorp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both ConnectOne Bancorp and Northrim BanCorp 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 ConnectOne Bancorp and Northrim BanCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ConnectOne Bancorp and Northrim BanCorp, you can compare the effects of market volatilities on ConnectOne Bancorp and Northrim BanCorp 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 ConnectOne Bancorp with a short position of Northrim BanCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ConnectOne Bancorp and Northrim BanCorp.

Diversification Opportunities for ConnectOne Bancorp and Northrim BanCorp

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ConnectOne and Northrim is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim BanCorp and ConnectOne Bancorp 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 ConnectOne Bancorp are associated (or correlated) with Northrim BanCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrim BanCorp has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and Northrim BanCorp go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and Northrim BanCorp

Given the investment horizon of 90 days ConnectOne Bancorp is expected to generate 1.81 times less return on investment than Northrim BanCorp. But when comparing it to its historical volatility, ConnectOne Bancorp is 1.05 times less risky than Northrim BanCorp. It trades about 0.2 of its potential returns per unit of risk. Northrim BanCorp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  6,666  in Northrim BanCorp on August 28, 2024 and sell it today you would earn a total of  2,142  from holding Northrim BanCorp or generate 32.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ConnectOne Bancorp  vs.  Northrim BanCorp

 Performance 
       Timeline  
ConnectOne Bancorp 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ConnectOne Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.
Northrim BanCorp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Northrim BanCorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Northrim BanCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

ConnectOne Bancorp and Northrim BanCorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ConnectOne Bancorp and Northrim BanCorp

The main advantage of trading using opposite ConnectOne Bancorp and Northrim BanCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConnectOne Bancorp position performs unexpectedly, Northrim BanCorp 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 Northrim BanCorp will offset losses from the drop in Northrim BanCorp's long position.
The idea behind ConnectOne Bancorp and Northrim BanCorp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

Other Complementary Tools

Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing