Correlation Between Bankwell Financial and First Community
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and First Community 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 First Community 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 First Community, you can compare the effects of market volatilities on Bankwell Financial and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and First Community.
Diversification Opportunities for Bankwell Financial and First Community
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bankwell and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and First Community go up and down completely randomly.
Pair Corralation between Bankwell Financial and First Community
Given the investment horizon of 90 days Bankwell Financial Group is expected to generate 1.96 times more return on investment than First Community. However, Bankwell Financial is 1.96 times more volatile than First Community. It trades about 0.27 of its potential returns per unit of risk. First Community is currently generating about 0.3 per unit of risk. If you would invest 2,884 in Bankwell Financial Group on August 28, 2024 and sell it today you would earn a total of 570.00 from holding Bankwell Financial Group or generate 19.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankwell Financial Group vs. First Community
Performance |
| Timeline |
| Bankwell Financial |
| First Community |
Bankwell Financial and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and First Community
The main advantage of trading using opposite Bankwell Financial and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.| Bankwell Financial vs. Fifth Third Bancorp | Bankwell Financial vs. Huntington Bancshares Incorporated | Bankwell Financial vs. Comerica | Bankwell Financial vs. MT Bank |
| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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