Correlation Between First Capital and Bridgewater Bancshares
Can any of the company-specific risk be diversified away by investing in both First Capital 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 First Capital and Bridgewater Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Bridgewater Bancshares, you can compare the effects of market volatilities on First Capital 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 First Capital with a short position of Bridgewater Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Bridgewater Bancshares.
Diversification Opportunities for First Capital and Bridgewater Bancshares
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Bridgewater is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Bridgewater Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares and First Capital 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 First Capital 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 First Capital i.e., First Capital and Bridgewater Bancshares go up and down completely randomly.
Pair Corralation between First Capital and Bridgewater Bancshares
Given the investment horizon of 90 days First Capital is expected to generate 1.26 times less return on investment than Bridgewater Bancshares. In addition to that, First Capital is 1.13 times more volatile than Bridgewater Bancshares. It trades about 0.04 of its total potential returns per unit of risk. Bridgewater Bancshares is currently generating about 0.06 per unit of volatility. If you would invest 1,181 in Bridgewater Bancshares on September 30, 2024 and sell it today you would earn a total of 168.00 from holding Bridgewater Bancshares or generate 14.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
First Capital vs. Bridgewater Bancshares
Performance |
Timeline |
First Capital |
Bridgewater Bancshares |
First Capital and Bridgewater Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Capital and Bridgewater Bancshares
The main advantage of trading using opposite First Capital and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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.First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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