Correlation Between Bankwell Financial and Middlefield Banc
Can any of the company-specific risk be diversified away by investing in both Bankwell Financial and Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc, you can compare the effects of market volatilities on Bankwell Financial and Middlefield Banc 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 Middlefield Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankwell Financial and Middlefield Banc.
Diversification Opportunities for Bankwell Financial and Middlefield Banc
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bankwell and Middlefield is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Middlefield Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlefield Banc 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 Middlefield Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlefield Banc has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Middlefield Banc go up and down completely randomly.
Pair Corralation between Bankwell Financial and Middlefield Banc
Given the investment horizon of 90 days Bankwell Financial is expected to generate 1.45 times less return on investment than Middlefield Banc. But when comparing it to its historical volatility, Bankwell Financial Group is 1.2 times less risky than Middlefield Banc. It trades about 0.1 of its potential returns per unit of risk. Middlefield Banc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,570 in Middlefield Banc on September 8, 2024 and sell it today you would earn a total of 530.00 from holding Middlefield Banc or generate 20.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Bankwell Financial Group vs. Middlefield Banc
Performance |
Timeline |
Bankwell Financial |
Middlefield Banc |
Bankwell Financial and Middlefield Banc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bankwell Financial and Middlefield Banc
The main advantage of trading using opposite Bankwell Financial and Middlefield Banc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankwell Financial position performs unexpectedly, Middlefield Banc 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 Middlefield Banc will offset losses from the drop in Middlefield Banc's long position.Bankwell Financial vs. Franklin Financial Services | Bankwell Financial vs. The First Bancshares, | Bankwell Financial vs. Home Federal Bancorp | Bankwell Financial vs. Lake Shore Bancorp |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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