Correlation Between Bridgewater Bancshares and HMN Financial

Can any of the company-specific risk be diversified away by investing in both Bridgewater Bancshares and HMN Financial 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 Bridgewater Bancshares and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bridgewater Bancshares and HMN Financial, you can compare the effects of market volatilities on Bridgewater Bancshares and HMN Financial 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 Bridgewater Bancshares with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgewater Bancshares and HMN Financial.

Diversification Opportunities for Bridgewater Bancshares and HMN Financial

-0.06

Correlation Coefficient

Bridgewater Bancshares  HMN Financial

Good diversification

The 3 months correlation between Bridgewater and HMN is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bridgewater Bancshares and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Bridgewater Bancshares 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 Bridgewater Bancshares are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Bridgewater Bancshares i.e., Bridgewater Bancshares and HMN Financial go up and down completely randomly.

Pair Corralation between Bridgewater Bancshares and HMN Financial

If you would invest  2,799  in HMN Financial on September 29, 2024 and sell it today you would earn a total of  0.00  from holding HMN Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Bridgewater Bancshares  vs.  HMN Financial

Bridgewater Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgewater Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bridgewater Bancshares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HMN Financial

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HMN Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bridgewater Bancshares and HMN Financial

The main advantage of trading using opposite Bridgewater Bancshares and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgewater Bancshares position performs unexpectedly, HMN Financial 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 HMN Financial will offset losses from the drop in HMN Financial's long position.

The idea behind Bridgewater Bancshares and HMN Financial 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..