Correlation Between Crimson Wine and Northrim BanCorp

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

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

Diversification Opportunities for Crimson Wine and Northrim BanCorp

-0.27

Correlation Coefficient

Crimson Wine  Northrim BanCorp

Very good diversification

The 3 months correlation between Crimson and Northrim is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim BanCorp and Crimson Wine 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 Crimson Wine 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 Crimson Wine i.e., Crimson Wine and Northrim BanCorp go up and down completely randomly.

Pair Corralation between Crimson Wine and Northrim BanCorp

Given the investment horizon of 90 days Crimson Wine is expected to generate 5.09 times less return on investment than Northrim BanCorp. But when comparing it to its historical volatility, Crimson Wine is 1.36 times less risky than Northrim BanCorp. It trades about 0.02 of its potential returns per unit of risk. Northrim BanCorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,923  in Northrim BanCorp on October 10, 2024 and sell it today you would earn a total of  1,542  from holding Northrim BanCorp or generate 26.03% return on investment over 90 days.

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

Crimson Wine  vs.  Northrim BanCorp

Crimson Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Northrim BanCorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northrim BanCorp are ranked lower than 5 (%) 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.

Pair Trading with Crimson Wine and Northrim BanCorp

The main advantage of trading using opposite Crimson Wine and Northrim BanCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crimson Wine 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 Crimson Wine 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.