Correlation Between Transcat and Northrim BanCorp
Can any of the company-specific risk be diversified away by investing in both Transcat 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 Transcat and Northrim BanCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transcat and Northrim BanCorp, you can compare the effects of market volatilities on Transcat 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 Transcat with a short position of Northrim BanCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcat and Northrim BanCorp.
Diversification Opportunities for Transcat and Northrim BanCorp
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transcat and Northrim is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Transcat and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim BanCorp and Transcat 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 Transcat 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 Transcat i.e., Transcat and Northrim BanCorp go up and down completely randomly.
Pair Corralation between Transcat and Northrim BanCorp
Given the investment horizon of 90 days Transcat is expected to under-perform the Northrim BanCorp. In addition to that, Transcat is 1.11 times more volatile than Northrim BanCorp. It trades about -0.04 of its total potential returns per unit of risk. Northrim BanCorp is currently generating about 0.34 per unit of volatility. 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 |
Transcat vs. Northrim BanCorp
Performance |
| Timeline |
| Transcat |
| Northrim BanCorp |
Transcat and Northrim BanCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transcat and Northrim BanCorp
The main advantage of trading using opposite Transcat and Northrim BanCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcat 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.| Transcat vs. BlueLinx Holdings | Transcat vs. SiteOne Landscape Supply | Transcat vs. DXP Enterprises | Transcat vs. Core Main |
| Northrim BanCorp vs. Peoples Bancorp | Northrim BanCorp vs. Eagle Bancorp | Northrim BanCorp vs. United Bankshares | Northrim BanCorp vs. Pacific Premier 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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