Correlation Between Commonwealth Bank and Bankwell Financial
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Bankwell 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 Commonwealth Bank and Bankwell Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and Bankwell Financial Group, you can compare the effects of market volatilities on Commonwealth Bank and Bankwell 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 Commonwealth Bank with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Bankwell Financial.
Diversification Opportunities for Commonwealth Bank and Bankwell Financial
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Bankwell is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Commonwealth Bank 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 Commonwealth Bank of are associated (or correlated) with Bankwell Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankwell Financial has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Bankwell Financial go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Bankwell Financial
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.63 times more return on investment than Bankwell Financial. However, Commonwealth Bank of is 1.59 times less risky than Bankwell Financial. It trades about 0.17 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.07 per unit of risk. If you would invest 9,561 in Commonwealth Bank of on November 3, 2024 and sell it today you would earn a total of 447.00 from holding Commonwealth Bank of or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Bankwell Financial Group
Performance |
| Timeline |
| Commonwealth Bank |
| Bankwell Financial |
Commonwealth Bank and Bankwell Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Bankwell Financial
The main advantage of trading using opposite Commonwealth Bank and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Bankwell 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 Bankwell Financial will offset losses from the drop in Bankwell Financial's long position.| Commonwealth Bank vs. Svenska Handelsbanken PK | Commonwealth Bank vs. ANZ Group Holdings | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
| Bankwell Financial vs. Franklin Financial Services | Bankwell Financial vs. The First Bancshares, | Bankwell Financial vs. Home Federal Bancorp | Bankwell Financial vs. Lake Shore 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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