Correlation Between Home Federal and Bridgewater Bancshares
Can any of the company-specific risk be diversified away by investing in both Home Federal 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 Home Federal and Bridgewater Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and Bridgewater Bancshares, you can compare the effects of market volatilities on Home Federal 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 Home Federal with a short position of Bridgewater Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Bridgewater Bancshares.
Diversification Opportunities for Home Federal and Bridgewater Bancshares
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Home and Bridgewater is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bridgewater Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares and Home Federal 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 Home Federal 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 Home Federal i.e., Home Federal and Bridgewater Bancshares go up and down completely randomly.
Pair Corralation between Home Federal and Bridgewater Bancshares
Given the investment horizon of 90 days Home Federal is expected to generate 3.08 times less return on investment than Bridgewater Bancshares. In addition to that, Home Federal is 1.24 times more volatile than Bridgewater Bancshares. It trades about 0.03 of its total potential returns per unit of risk. Bridgewater Bancshares is currently generating about 0.13 per unit of volatility. If you would invest 1,423 in Bridgewater Bancshares on September 5, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Federal Bancorp vs. Bridgewater Bancshares
Performance |
| Timeline |
| Home Federal Bancorp |
| Bridgewater Bancshares |
Home Federal and Bridgewater Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Bridgewater Bancshares
The main advantage of trading using opposite Home Federal and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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.| Home Federal vs. Finward Bancorp | Home Federal vs. Aquagold International | Home Federal vs. Thrivent High Yield | Home Federal vs. Morningstar Unconstrained Allocation |
| Bridgewater Bancshares vs. Home Federal Bancorp | Bridgewater Bancshares vs. First Financial Northwest | Bridgewater Bancshares vs. First Northwest Bancorp | Bridgewater Bancshares vs. First Capital |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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