Correlation Between Northrim BanCorp and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Northrim BanCorp and US 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 Northrim BanCorp and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrim BanCorp and US Bancorp, you can compare the effects of market volatilities on Northrim BanCorp and US 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 Northrim BanCorp with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrim BanCorp and US Bancorp.
Diversification Opportunities for Northrim BanCorp and US Bancorp
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northrim and USB is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northrim BanCorp and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Northrim BanCorp i.e., Northrim BanCorp and US Bancorp go up and down completely randomly.
Pair Corralation between Northrim BanCorp and US Bancorp
Given the investment horizon of 90 days Northrim BanCorp is expected to generate 1.98 times more return on investment than US Bancorp. However, Northrim BanCorp is 1.98 times more volatile than US Bancorp. It trades about 0.29 of its potential returns per unit of risk. US Bancorp is currently generating about 0.23 per unit of risk. If you would invest 6,651 in Northrim BanCorp on August 30, 2024 and sell it today you would earn a total of 1,906 from holding Northrim BanCorp or generate 28.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrim BanCorp vs. US Bancorp
Performance |
| Timeline |
| Northrim BanCorp |
| US Bancorp |
Northrim BanCorp and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrim BanCorp and US Bancorp
The main advantage of trading using opposite Northrim BanCorp and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrim BanCorp position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Northrim BanCorp vs. Peoples Bancorp | Northrim BanCorp vs. Eagle Bancorp | Northrim BanCorp vs. United Bankshares | Northrim BanCorp vs. Pacific Premier Bancorp |
| US Bancorp vs. PNC Financial Services | US Bancorp vs. KeyCorp | US Bancorp vs. Zions Bancorporation | US Bancorp vs. Fifth Third Bancorp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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