Correlation Between UFP Technologies and Northrim BanCorp

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

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

Diversification Opportunities for UFP Technologies and Northrim BanCorp

0.05

Correlation Coefficient

UFP Technologies  Northrim BanCorp

Significant diversification

The 3 months correlation between UFP and Northrim is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding UFP Technologies and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim BanCorp and UFP Technologies 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 UFP Technologies 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 UFP Technologies i.e., UFP Technologies and Northrim BanCorp go up and down completely randomly.

Pair Corralation between UFP Technologies and Northrim BanCorp

Given the investment horizon of 90 days UFP Technologies is expected to under-perform the Northrim BanCorp. In addition to that, UFP Technologies is 1.29 times more volatile than Northrim BanCorp. It trades about -0.06 of its total potential returns per unit of risk. Northrim BanCorp is currently generating about 0.13 per unit of volatility. If you would invest  6,956  in Northrim BanCorp on September 14, 2024 and sell it today you would earn a total of  1,644  from holding Northrim BanCorp or generate 23.63% return on investment over 90 days.

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

UFP Technologies  vs.  Northrim BanCorp

UFP Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Northrim BanCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northrim BanCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Northrim BanCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UFP Technologies and Northrim BanCorp

The main advantage of trading using opposite UFP Technologies and Northrim BanCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UFP Technologies 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 UFP Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.