Correlation Between Bankwell Financial and Community Trust
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Community Trust 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 Community Trust 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 Community Trust Bancorp, you can compare the effects of market volatilities on Bankwell Financial and Community Trust 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 Community Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Community Trust.
Diversification Opportunities for Bankwell Financial and Community Trust
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bankwell and Community is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp 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 Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Community Trust go up and down completely randomly.
Pair Corralation between Bankwell Financial and Community Trust
Given the investment horizon of 90 days Bankwell Financial is expected to generate 1.48 times less return on investment than Community Trust. In addition to that, Bankwell Financial is 1.1 times more volatile than Community Trust Bancorp. It trades about 0.06 of its total potential returns per unit of risk. Community Trust Bancorp is currently generating about 0.1 per unit of volatility. If you would invest 4,017 in Community Trust Bancorp on August 28, 2024 and sell it today you would earn a total of 1,990 from holding Community Trust Bancorp or generate 49.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankwell Financial Group vs. Community Trust Bancorp
Performance |
| Timeline |
| Bankwell Financial |
| Community Trust Bancorp |
Bankwell Financial and Community Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and Community Trust
The main advantage of trading using opposite Bankwell Financial and Community Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, Community Trust 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 Community Trust will offset losses from the drop in Community Trust's long position.| Bankwell Financial vs. Fifth Third Bancorp | Bankwell Financial vs. Zions Bancorporation | Bankwell Financial vs. Huntington Bancshares Incorporated | Bankwell Financial vs. Comerica |
| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust Bancshares |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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