Correlation Between Bridgewater Bancshares and Tectonic Financial

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

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

Diversification Opportunities for Bridgewater Bancshares and Tectonic Financial

0.48

Correlation Coefficient

Bridgewater Bancshares  Tectonic Financial

Very weak diversification

The 3 months correlation between Bridgewater and Tectonic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bridgewater Bancshares Deposit and Tectonic Financial PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic 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 Depositary are associated (or correlated) with Tectonic Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Financial has no effect on the direction of Bridgewater Bancshares i.e., Bridgewater Bancshares and Tectonic Financial go up and down completely randomly.

Pair Corralation between Bridgewater Bancshares and Tectonic Financial

Assuming the 90 days horizon Bridgewater Bancshares Depositary is expected to under-perform the Tectonic Financial. In addition to that, Bridgewater Bancshares is 2.03 times more volatile than Tectonic Financial PR. It trades about -0.03 of its total potential returns per unit of risk. Tectonic Financial PR is currently generating about -0.01 per unit of volatility. If you would invest  1,025  in Tectonic Financial PR on March 4, 2024 and sell it today you would lose (2.00) from holding Tectonic Financial PR or give up 0.2% of portfolio value over 90 days.

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

Bridgewater Bancshares Deposit  vs.  Tectonic Financial PR

Bridgewater Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgewater Bancshares Depositary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Bridgewater Bancshares is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tectonic Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tectonic Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bridgewater Bancshares and Tectonic Financial

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

The idea behind Bridgewater Bancshares Depositary and Tectonic Financial PR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.