Correlation Between First Business and Bankwell Financial
Can any of the company-specific risk be diversified away by investing in both First Business 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 First Business and Bankwell Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and Bankwell Financial Group, you can compare the effects of market volatilities on First Business 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 First Business with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Bankwell Financial.
Diversification Opportunities for First Business and Bankwell Financial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Bankwell is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and First Business 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 First Business Financial 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 First Business i.e., First Business and Bankwell Financial go up and down completely randomly.
Pair Corralation between First Business and Bankwell Financial
Given the investment horizon of 90 days First Business is expected to generate 1.24 times less return on investment than Bankwell Financial. But when comparing it to its historical volatility, First Business Financial is 1.0 times less risky than Bankwell Financial. It trades about 0.22 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,884 in Bankwell Financial Group on August 28, 2024 and sell it today you would earn a total of 570.00 from holding Bankwell Financial Group or generate 19.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Bankwell Financial Group
Performance |
| Timeline |
| First Business Financial |
| Bankwell Financial |
First Business and Bankwell Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Bankwell Financial
The main advantage of trading using opposite First Business and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business 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.| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. Comerica |
| 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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