Correlation Between ECB Bancorp and Bridgewater Bancshares
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp 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 ECB Bancorp and Bridgewater Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and Bridgewater Bancshares, you can compare the effects of market volatilities on ECB Bancorp 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 ECB Bancorp with a short position of Bridgewater Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and Bridgewater Bancshares.
Diversification Opportunities for ECB Bancorp and Bridgewater Bancshares
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECB and Bridgewater is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and Bridgewater Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares and ECB Bancorp 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 ECB Bancorp 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 ECB Bancorp i.e., ECB Bancorp and Bridgewater Bancshares go up and down completely randomly.
Pair Corralation between ECB Bancorp and Bridgewater Bancshares
Given the investment horizon of 90 days ECB Bancorp is expected to generate 3.89 times less return on investment than Bridgewater Bancshares. But when comparing it to its historical volatility, ECB Bancorp is 1.76 times less risky than Bridgewater Bancshares. It trades about 0.06 of its potential returns per unit of risk. Bridgewater Bancshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,423 in Bridgewater Bancshares on September 4, 2024 and sell it today you would earn a total of 70.00 from holding Bridgewater Bancshares or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECB Bancorp vs. Bridgewater Bancshares
Performance |
| Timeline |
| ECB Bancorp |
| Bridgewater Bancshares |
ECB Bancorp and Bridgewater Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and Bridgewater Bancshares
The main advantage of trading using opposite ECB Bancorp and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp 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.| ECB Bancorp vs. International Bancshares | ECB Bancorp vs. Finward Bancorp | ECB Bancorp vs. Aquagold International | ECB Bancorp vs. Thrivent High Yield |
| Bridgewater Bancshares vs. International Bancshares | Bridgewater Bancshares vs. Finward Bancorp | Bridgewater Bancshares vs. Aquagold International | Bridgewater Bancshares vs. Thrivent High Yield |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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