Correlation Between Bankwell Financial and First Interstate
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and First Interstate 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 Interstate 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 Interstate BancSystem, you can compare the effects of market volatilities on Bankwell Financial and First Interstate 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 Interstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and First Interstate.
Diversification Opportunities for Bankwell Financial and First Interstate
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bankwell and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban 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 Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and First Interstate go up and down completely randomly.
Pair Corralation between Bankwell Financial and First Interstate
Given the investment horizon of 90 days Bankwell Financial is expected to generate 1.23 times less return on investment than First Interstate. In addition to that, Bankwell Financial is 1.02 times more volatile than First Interstate BancSystem. It trades about 0.06 of its total potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.08 per unit of volatility. If you would invest 2,573 in First Interstate BancSystem on August 28, 2024 and sell it today you would earn a total of 974.00 from holding First Interstate BancSystem or generate 37.85% 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 Interstate BancSystem
Performance |
| Timeline |
| Bankwell Financial |
| First Interstate Ban |
Bankwell Financial and First Interstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and First Interstate
The main advantage of trading using opposite Bankwell Financial and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, First Interstate 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 Interstate will offset losses from the drop in First Interstate's long position.| Bankwell Financial vs. Fifth Third Bancorp | Bankwell Financial vs. Zions Bancorporation | Bankwell Financial vs. Huntington Bancshares Incorporated | Bankwell Financial vs. Comerica |
| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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