Correlation Between Capital One and Bridgewater Bancshares
Can any of the company-specific risk be diversified away by investing in both Capital One and Bridgewater Bancshares 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 Capital One and Bridgewater Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Bridgewater Bancshares Depositary, you can compare the effects of market volatilities on Capital One and Bridgewater Bancshares 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 Capital One with a short position of Bridgewater Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Bridgewater Bancshares.
Diversification Opportunities for Capital One and Bridgewater Bancshares
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Bridgewater is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Bridgewater Bancshares Deposit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares and Capital One 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 Capital One Financial are associated (or correlated) with Bridgewater Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgewater Bancshares has no effect on the direction of Capital One i.e., Capital One and Bridgewater Bancshares go up and down completely randomly.
Pair Corralation between Capital One and Bridgewater Bancshares
Assuming the 90 days trading horizon Capital One is expected to generate 1.11 times less return on investment than Bridgewater Bancshares. But when comparing it to its historical volatility, Capital One Financial is 1.56 times less risky than Bridgewater Bancshares. It trades about 0.08 of its potential returns per unit of risk. Bridgewater Bancshares Depositary is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,530 in Bridgewater Bancshares Depositary on August 24, 2024 and sell it today you would earn a total of 320.00 from holding Bridgewater Bancshares Depositary or generate 20.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Bridgewater Bancshares Deposit
Performance |
| Timeline |
| Capital One Financial |
| Bridgewater Bancshares |
Capital One and Bridgewater Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Bridgewater Bancshares
The main advantage of trading using opposite Capital One and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Bridgewater Bancshares 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 Bridgewater Bancshares will offset losses from the drop in Bridgewater Bancshares' long position.| Capital One vs. Capital One Financial | Capital One vs. Bank of America | Capital One vs. Wells Fargo | Capital One vs. Bank of America |
| Bridgewater Bancshares vs. Capital One Financial | Bridgewater Bancshares vs. Capital One Financial | Bridgewater Bancshares vs. Bank of America | Bridgewater Bancshares vs. KeyCorp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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