Correlation Between Northrim BanCorp and Transcat
Can any of the company-specific risk be diversified away by investing in both Northrim BanCorp and Transcat 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 Northrim BanCorp and Transcat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrim BanCorp and Transcat, you can compare the effects of market volatilities on Northrim BanCorp and Transcat 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 Northrim BanCorp with a short position of Transcat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrim BanCorp and Transcat.
Diversification Opportunities for Northrim BanCorp and Transcat
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northrim and Transcat is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Northrim BanCorp and Transcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcat and Northrim 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 Northrim BanCorp are associated (or correlated) with Transcat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcat has no effect on the direction of Northrim BanCorp i.e., Northrim BanCorp and Transcat go up and down completely randomly.
Pair Corralation between Northrim BanCorp and Transcat
Given the investment horizon of 90 days Northrim BanCorp is expected to generate 0.9 times more return on investment than Transcat. However, Northrim BanCorp is 1.11 times less risky than Transcat. It trades about 0.34 of its potential returns per unit of risk. Transcat is currently generating about -0.04 per unit of risk. 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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrim BanCorp vs. Transcat
Performance |
| Timeline |
| Northrim BanCorp |
| Transcat |
Northrim BanCorp and Transcat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrim BanCorp and Transcat
The main advantage of trading using opposite Northrim BanCorp and Transcat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrim BanCorp position performs unexpectedly, Transcat 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 Transcat will offset losses from the drop in Transcat's long position.| Northrim BanCorp vs. Peoples Bancorp | Northrim BanCorp vs. Eagle Bancorp | Northrim BanCorp vs. United Bankshares | Northrim BanCorp vs. Pacific Premier Bancorp |
| Transcat vs. BlueLinx Holdings | Transcat vs. SiteOne Landscape Supply | Transcat vs. DXP Enterprises | Transcat vs. Core Main |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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