Correlation Between Northrim BanCorp and Bank of NT

Can any of the company-specific risk be diversified away by investing in both Northrim BanCorp and Bank of NT 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 Bank of NT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northrim BanCorp and Bank of NT, you can compare the effects of market volatilities on Northrim BanCorp and Bank of NT 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 Bank of NT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrim BanCorp and Bank of NT.

Diversification Opportunities for Northrim BanCorp and Bank of NT

0.06

Correlation Coefficient

Northrim BanCorp  Bank of NT

Significant diversification

The 3 months correlation between Northrim and Bank is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Northrim BanCorp and Bank of NT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of NT 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 Bank of NT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of NT has no effect on the direction of Northrim BanCorp i.e., Northrim BanCorp and Bank of NT go up and down completely randomly.

Pair Corralation between Northrim BanCorp and Bank of NT

Given the investment horizon of 90 days Northrim BanCorp is expected to under-perform the Bank of NT. In addition to that, Northrim BanCorp is 1.17 times more volatile than Bank of NT. It trades about -0.04 of its total potential returns per unit of risk. Bank of NT is currently generating about 0.19 per unit of volatility. If you would invest  3,178  in Bank of NT on February 1, 2024 and sell it today you would earn a total of  222.00  from holding Bank of NT or generate 6.99% return on investment over 90 days.

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

Northrim BanCorp  vs.  Bank of NT

Northrim BanCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northrim BanCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Northrim BanCorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Bank of NT

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of NT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Bank of NT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northrim BanCorp and Bank of NT

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

The idea behind Northrim BanCorp and Bank of NT 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.