Correlation Between Independent Bank and Bankwell Financial
Can any of the company-specific risk be diversified away by investing in both Independent 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 Independent 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 Independent Bank and Bankwell Financial Group, you can compare the effects of market volatilities on Independent 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 Independent Bank with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Bankwell Financial.
Diversification Opportunities for Independent Bank and Bankwell Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Independent and Bankwell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Independent 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 Independent Bank 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 Independent Bank i.e., Independent Bank and Bankwell Financial go up and down completely randomly.
Pair Corralation between Independent Bank and Bankwell Financial
Given the investment horizon of 90 days Independent Bank is expected to generate 1.01 times more return on investment than Bankwell Financial. However, Independent Bank is 1.01 times more volatile than Bankwell Financial Group. 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 5,282 in Independent Bank on October 21, 2024 and sell it today you would earn a total of 1,422 from holding Independent Bank or generate 26.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Bankwell Financial Group
Performance |
| Timeline |
| Independent Bank |
| Bankwell Financial |
Independent Bank and Bankwell Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Bankwell Financial
The main advantage of trading using opposite Independent Bank and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent 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.| Independent Bank vs. Capitol Federal Financial | Independent Bank vs. BankFinancial | Independent Bank vs. Business First Bancshares | Independent Bank vs. First Bancorp |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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