Correlation Between Regions Financial and Bridgewater Bancshares

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

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

Diversification Opportunities for Regions Financial and Bridgewater Bancshares

0.58

Correlation Coefficient

Regions Financial  Bridgewater Bancshares

Very weak diversification

The 3 months correlation between Regions and Bridgewater is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Bridgewater Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares and Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Bridgewater Bancshares go up and down completely randomly.

Pair Corralation between Regions Financial and Bridgewater Bancshares

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Bridgewater Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.08 times less risky than Bridgewater Bancshares. The stock trades about -0.37 of its potential returns per unit of risk. The Bridgewater Bancshares is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  1,494  in Bridgewater Bancshares on October 3, 2024 and sell it today you would lose (143.00) from holding Bridgewater Bancshares or give up 9.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Regions Financial  vs.  Bridgewater Bancshares

Regions Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Regions Financial and Bridgewater Bancshares

The main advantage of trading using opposite Regions Financial and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial and Bridgewater Bancshares 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.