Correlation Between Bankwell Financial and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Waterstone Financial 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 Waterstone Financial 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 Waterstone Financial, you can compare the effects of market volatilities on Bankwell Financial and Waterstone Financial 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 Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Waterstone Financial.
Diversification Opportunities for Bankwell Financial and Waterstone Financial
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bankwell and Waterstone is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial 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 Waterstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterstone Financial has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Waterstone Financial go up and down completely randomly.
Pair Corralation between Bankwell Financial and Waterstone Financial
Given the investment horizon of 90 days Bankwell Financial Group is expected to generate 1.21 times more return on investment than Waterstone Financial. However, Bankwell Financial is 1.21 times more volatile than Waterstone Financial. It trades about 0.23 of its potential returns per unit of risk. Waterstone Financial is currently generating about 0.05 per unit of risk. If you would invest 2,833 in Bankwell Financial Group on September 1, 2024 and sell it today you would earn a total of 482.00 from holding Bankwell Financial Group or generate 17.01% 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. Waterstone Financial
Performance |
| Timeline |
| Bankwell Financial |
| Waterstone Financial |
Bankwell Financial and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankwell Financial and Waterstone Financial
The main advantage of trading using opposite Bankwell Financial and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, Waterstone Financial 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 Waterstone Financial will offset losses from the drop in Waterstone Financial's long position.| Bankwell Financial vs. Franklin Financial Services | Bankwell Financial vs. The First Bancshares, | Bankwell Financial vs. Home Federal Bancorp | Bankwell Financial vs. Lake Shore Bancorp |
| Waterstone Financial vs. National Bank Holdings | Waterstone Financial vs. Community West Bancshares | Waterstone Financial vs. Financial Institutions | Waterstone Financial vs. Kearny Financial Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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