Correlation Between Timken and Bridgetown Holdings
Can any of the company-specific risk be diversified away by investing in both Timken and Bridgetown Holdings 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 Timken and Bridgetown Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Bridgetown Holdings, you can compare the effects of market volatilities on Timken and Bridgetown Holdings 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 Timken with a short position of Bridgetown Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Bridgetown Holdings.
Diversification Opportunities for Timken and Bridgetown Holdings
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Timken and Bridgetown is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Bridgetown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgetown Holdings and Timken 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 Timken Company are associated (or correlated) with Bridgetown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgetown Holdings has no effect on the direction of Timken i.e., Timken and Bridgetown Holdings go up and down completely randomly.
Pair Corralation between Timken and Bridgetown Holdings
Considering the 90-day investment horizon Timken is expected to generate 16.02 times less return on investment than Bridgetown Holdings. But when comparing it to its historical volatility, Timken Company is 6.87 times less risky than Bridgetown Holdings. It trades about 0.01 of its potential returns per unit of risk. Bridgetown Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Bridgetown Holdings on October 10, 2024 and sell it today you would lose (7.00) from holding Bridgetown Holdings or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 25.81% |
| Values | Daily Returns |
Timken Company vs. Bridgetown Holdings
Performance |
| Timeline |
| Timken Company |
| Bridgetown Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Timken and Bridgetown Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Bridgetown Holdings
The main advantage of trading using opposite Timken and Bridgetown Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Bridgetown Holdings 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 Bridgetown Holdings will offset losses from the drop in Bridgetown Holdings' long position.The idea behind Timken Company and Bridgetown Holdings 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.| Bridgetown Holdings vs. Radcom | Bridgetown Holdings vs. Lipocine | Bridgetown Holdings vs. Playa Hotels Resorts | Bridgetown Holdings vs. RCI Hospitality Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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