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 Depositary, 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
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Bridgewater is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bridgewater Bancshares Deposit 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 Bancorp is expected to generate 1.37 times more return on investment than Bridgewater Bancshares. However, Home Federal is 1.37 times more volatile than Bridgewater Bancshares Depositary. It trades about 0.0 of its potential returns per unit of risk. Bridgewater Bancshares Depositary is currently generating about -0.04 per unit of risk. If you would invest 1,247 in Home Federal Bancorp on August 30, 2024 and sell it today you would lose (11.00) from holding Home Federal Bancorp or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.18% |
| Values | Daily Returns |
Home Federal Bancorp vs. Bridgewater Bancshares Deposit
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.The idea behind Home Federal Bancorp and Bridgewater Bancshares Depositary 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.| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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