Correlation Between Bankwell Financial and Bank of South

Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Bank of South 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 Bankwell Financial and Bank of South into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bankwell Financial Group and Bank of South, you can compare the effects of market volatilities on Bankwell Financial and Bank of South 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 Bankwell Financial with a short position of Bank of South. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Bank of South.

Diversification Opportunities for Bankwell Financial and Bank of South

-0.22

Correlation Coefficient

Bankwell Financial  Bank of South

Very good diversification

The 3 months correlation between Bankwell and Bank is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Bank of South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of South and Bankwell Financial 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 Bankwell Financial Group are associated (or correlated) with Bank of South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of South has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Bank of South go up and down completely randomly.

Pair Corralation between Bankwell Financial and Bank of South

If you would invest  2,892  in Bankwell Financial Group on September 9, 2024 and sell it today you would earn a total of  408.00  from holding Bankwell Financial Group or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

Bankwell Financial Group  vs.  Bank of South

Bankwell Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Bankwell Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Bank of South

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Bankwell Financial and Bank of South

The main advantage of trading using opposite Bankwell Financial and Bank of South positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, Bank of South 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 Bank of South will offset losses from the drop in Bank of South's long position.

The idea behind Bankwell Financial Group and Bank of South 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.