Correlation Between Century Small and Bridge Builder

Can any of the company-specific risk be diversified away by investing in both Century Small and Bridge Builder 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 Century Small and Bridge Builder into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Small Cap and Bridge Builder Tax, you can compare the effects of market volatilities on Century Small and Bridge Builder 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 Century Small with a short position of Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Small and Bridge Builder.

Diversification Opportunities for Century Small and Bridge Builder

-0.6

Correlation Coefficient

Century Small  Bridge Builder

Excellent diversification

The 3 months correlation between Century and Bridge is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and Bridge Builder Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Tax and Century Small 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 Century Small Cap are associated (or correlated) with Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Tax has no effect on the direction of Century Small i.e., Century Small and Bridge Builder go up and down completely randomly.

Pair Corralation between Century Small and Bridge Builder

Assuming the 90 days horizon Century Small Cap is expected to under-perform the Bridge Builder. In addition to that, Century Small is 1.57 times more volatile than Bridge Builder Tax. It trades about -0.09 of its total potential returns per unit of risk. Bridge Builder Tax is currently generating about 0.17 per unit of volatility. If you would invest  1,120  in Bridge Builder Tax on December 27, 2024 and sell it today you would earn a total of  96.00  from holding Bridge Builder Tax or generate 8.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Century Small Cap  vs.  Bridge Builder Tax

Century Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Century Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Bridge Builder Tax

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridge Builder Tax are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Bridge Builder may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Century Small and Bridge Builder

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

The idea behind Century Small Cap and Bridge Builder Tax 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.