Correlation Between Bankwell Financial and Franklin Financial

Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Franklin 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 Bankwell Financial and Franklin Financial 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 Franklin Financial Services, you can compare the effects of market volatilities on Bankwell Financial and Franklin 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 Bankwell Financial with a short position of Franklin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Franklin Financial.

Diversification Opportunities for Bankwell Financial and Franklin Financial

0.4

Correlation Coefficient

Bankwell Financial  Franklin Financial

Very weak diversification

The 3 months correlation between Bankwell and Franklin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Financial 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 Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Franklin Financial go up and down completely randomly.

Pair Corralation between Bankwell Financial and Franklin Financial

Given the investment horizon of 90 days Bankwell Financial Group is expected to under-perform the Franklin Financial. In addition to that, Bankwell Financial is 1.06 times more volatile than Franklin Financial Services. It trades about -0.02 of its total potential returns per unit of risk. Franklin Financial Services is currently generating about 0.18 per unit of volatility. If you would invest  2,974  in Franklin Financial Services on December 30, 2024 and sell it today you would earn a total of  566.00  from holding Franklin Financial Services or generate 19.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bankwell Financial Group  vs.  Franklin Financial Services

Bankwell Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bankwell Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bankwell Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Franklin Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bankwell Financial and Franklin Financial

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

The idea behind Bankwell Financial Group and Franklin Financial Services 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.