Correlation Between First Commonwealth and Bankwell Financial

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

Diversification Opportunities for First Commonwealth and Bankwell Financial

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between First and Bankwell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and First Commonwealth 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 First Commonwealth Financial 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 First Commonwealth i.e., First Commonwealth and Bankwell Financial go up and down completely randomly.

Pair Corralation between First Commonwealth and Bankwell Financial

Considering the 90-day investment horizon First Commonwealth Financial is expected to generate 0.94 times more return on investment than Bankwell Financial. However, First Commonwealth Financial is 1.06 times less risky than Bankwell Financial. It trades about 0.09 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.06 per unit of risk. If you would invest  1,187  in First Commonwealth Financial on September 6, 2024 and sell it today you would earn a total of  699.00  from holding First Commonwealth Financial or generate 58.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

First Commonwealth Financial  vs.  Bankwell Financial Group

 Performance 
       Timeline  
First Commonwealth 

Risk-Adjusted Performance

7 of 100

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

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 8 (%) 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.

First Commonwealth and Bankwell Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Commonwealth and Bankwell Financial

The main advantage of trading using opposite First Commonwealth and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth 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 First Commonwealth Financial 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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