Correlation Between Bankwell Financial and REDFLEX HOLDINGS
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS 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 REDFLEX HOLDINGS LTD, you can compare the effects of market volatilities on Bankwell Financial and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and REDFLEX HOLDINGS.
Diversification Opportunities for Bankwell Financial and REDFLEX HOLDINGS
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bankwell and REDFLEX is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and REDFLEX HOLDINGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDFLEX HOLDINGS LTD 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 REDFLEX HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDFLEX HOLDINGS LTD has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and REDFLEX HOLDINGS go up and down completely randomly.
Pair Corralation between Bankwell Financial and REDFLEX HOLDINGS
Given the investment horizon of 90 days Bankwell Financial Group is expected to under-perform the REDFLEX HOLDINGS. But the stock apears to be less risky and, when comparing its historical volatility, Bankwell Financial Group is 9.73 times less risky than REDFLEX HOLDINGS. The stock trades about -0.23 of its potential returns per unit of risk. The REDFLEX HOLDINGS LTD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.16 in REDFLEX HOLDINGS LTD on October 9, 2024 and sell it today you would earn a total of 0.04 from holding REDFLEX HOLDINGS LTD or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankwell Financial Group vs. REDFLEX HOLDINGS LTD
Performance |
| Timeline |
| Bankwell Financial |
| REDFLEX HOLDINGS LTD |
Bankwell Financial and REDFLEX HOLDINGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and REDFLEX HOLDINGS
The main advantage of trading using opposite Bankwell Financial and REDFLEX HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, REDFLEX HOLDINGS 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 REDFLEX HOLDINGS will offset losses from the drop in REDFLEX HOLDINGS's long position.| Bankwell Financial vs. Franklin Financial Services | Bankwell Financial vs. The First Bancshares, | Bankwell Financial vs. Home Federal Bancorp | Bankwell Financial vs. National Bankshares |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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