Correlation Between Bankwell Financial and Business First
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Business First 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 Bankwell Financial and Business First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bankwell Financial Group and Business First Bancshares, you can compare the effects of market volatilities on Bankwell Financial and Business First 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 Bankwell Financial with a short position of Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Business First.
Diversification Opportunities for Bankwell Financial and Business First
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bankwell and Business is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares and Bankwell 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 Bankwell Financial Group are associated (or correlated) with Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Business First go up and down completely randomly.
Pair Corralation between Bankwell Financial and Business First
Given the investment horizon of 90 days Bankwell Financial Group is expected to generate 0.92 times more return on investment than Business First. However, Bankwell Financial Group is 1.09 times less risky than Business First. It trades about 0.22 of its potential returns per unit of risk. Business First Bancshares is currently generating about 0.18 per unit of risk. If you would invest 2,852 in Bankwell Financial Group on August 25, 2024 and sell it today you would earn a total of 468.00 from holding Bankwell Financial Group or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bankwell Financial Group vs. Business First Bancshares
Performance |
| Timeline |
| Bankwell Financial |
| Business First Bancshares |
Bankwell Financial and Business First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and Business First
The main advantage of trading using opposite Bankwell Financial and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First's long position.| Bankwell Financial vs. Fifth Third Bancorp | Bankwell Financial vs. Zions Bancorporation | Bankwell Financial vs. Huntington Bancshares Incorporated | Bankwell Financial vs. PNC Financial Services |
| Business First vs. First Community | Business First vs. Community West Bancshares | Business First vs. First Financial Northwest | Business First vs. First Northwest Bancorp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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