Correlation Between Bridgewater Bancshares and First Merchants
Can any of the company-specific risk be diversified away by investing in both Bridgewater Bancshares and First Merchants 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 Bridgewater Bancshares and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgewater Bancshares Depositary and First Merchants, you can compare the effects of market volatilities on Bridgewater Bancshares and First Merchants 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 Bridgewater Bancshares with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgewater Bancshares and First Merchants.
Diversification Opportunities for Bridgewater Bancshares and First Merchants
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bridgewater and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bridgewater Bancshares Deposit and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Bridgewater Bancshares 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 Bridgewater Bancshares Depositary are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Bridgewater Bancshares i.e., Bridgewater Bancshares and First Merchants go up and down completely randomly.
Pair Corralation between Bridgewater Bancshares and First Merchants
Assuming the 90 days horizon Bridgewater Bancshares Depositary is expected to generate 1.97 times more return on investment than First Merchants. However, Bridgewater Bancshares is 1.97 times more volatile than First Merchants. It trades about 0.05 of its potential returns per unit of risk. First Merchants is currently generating about 0.07 per unit of risk. If you would invest 1,595 in Bridgewater Bancshares Depositary on August 27, 2024 and sell it today you would earn a total of 265.00 from holding Bridgewater Bancshares Depositary or generate 16.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgewater Bancshares Deposit vs. First Merchants
Performance |
| Timeline |
| Bridgewater Bancshares |
| First Merchants |
Bridgewater Bancshares and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgewater Bancshares and First Merchants
The main advantage of trading using opposite Bridgewater Bancshares and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgewater Bancshares position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.| Bridgewater Bancshares vs. Capital One Financial | Bridgewater Bancshares vs. Capital One Financial | Bridgewater Bancshares vs. Bank of America |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Zions Bancorporation | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. PNC Financial Services |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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