Correlation Between Community Trust and Bankwell Financial
Can any of the company-specific risk be diversified away by investing in both Community Trust 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 Community Trust and Bankwell Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Trust Bancorp and Bankwell Financial Group, you can compare the effects of market volatilities on Community Trust 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 Community Trust with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Trust and Bankwell Financial.
Diversification Opportunities for Community Trust and Bankwell Financial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Bankwell is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Community Trust 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 Community Trust Bancorp 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 Community Trust i.e., Community Trust and Bankwell Financial go up and down completely randomly.
Pair Corralation between Community Trust and Bankwell Financial
Given the investment horizon of 90 days Community Trust Bancorp is expected to generate 0.92 times more return on investment than Bankwell Financial. However, Community Trust Bancorp is 1.09 times less risky than Bankwell Financial. It trades about 0.05 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.03 per unit of risk. If you would invest 4,275 in Community Trust Bancorp on August 28, 2024 and sell it today you would earn a total of 1,732 from holding Community Trust Bancorp or generate 40.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Trust Bancorp vs. Bankwell Financial Group
Performance |
| Timeline |
| Community Trust Bancorp |
| Bankwell Financial |
Community Trust and Bankwell Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Trust and Bankwell Financial
The main advantage of trading using opposite Community Trust and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Trust 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.| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust Bancshares |
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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 Stocks Directory module to find actively traded stocks across global markets.
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