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

-0.11

Correlation Coefficient

Transcat  Northrim BanCorp

Good diversification

The 3 months correlation between Transcat and Northrim is -0.11. 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 1.69 times more volatile than Northrim BanCorp. It trades about -0.16 of its total potential returns per unit of risk. Northrim BanCorp is currently generating about -0.04 per unit of volatility. If you would invest  7,776  in Northrim BanCorp on December 29, 2024 and sell it today you would lose (451.00) from holding Northrim BanCorp or give up 5.8% of portfolio value over 90 days.

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

Transcat  vs.  Northrim BanCorp

Transcat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transcat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Northrim BanCorp

Risk-Adjusted Performance

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 recent stock price disarray, may contribute to short-term losses for the investors.

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.

The idea behind Transcat 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.