Correlation Between Bank of South and Bankwell Financial

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Can any of the company-specific risk be diversified away by investing in both Bank of South 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 Bank of South and Bankwell Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of South and Bankwell Financial Group, you can compare the effects of market volatilities on Bank of South 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 Bank of South with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of South and Bankwell Financial.

Diversification Opportunities for Bank of South and Bankwell Financial

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Bankwell is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of South and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Bank of South 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 Bank of South 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 Bank of South i.e., Bank of South and Bankwell Financial go up and down completely randomly.

Pair Corralation between Bank of South and Bankwell Financial

Given the investment horizon of 90 days Bank of South is expected to under-perform the Bankwell Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Bank of South is 1.25 times less risky than Bankwell Financial. The otc stock trades about -0.06 of its potential returns per unit of risk. The Bankwell Financial Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,746  in Bankwell Financial Group on September 11, 2024 and sell it today you would earn a total of  518.00  from holding Bankwell Financial Group or generate 18.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy29.76%
ValuesDaily Returns

Bank of South  vs.  Bankwell Financial Group

 Performance 
       Timeline  
Bank of South 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bank of South has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of South is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Bankwell Financial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bankwell Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of South and Bankwell Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of South and Bankwell Financial

The main advantage of trading using opposite Bank of South and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of South 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.
The idea behind Bank of South and Bankwell Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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