Correlation Between Home Bancorp and Bankwell Financial
Can any of the company-specific risk be diversified away by investing in both Home Bancorp 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 Home Bancorp and Bankwell Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Bancorp and Bankwell Financial Group, you can compare the effects of market volatilities on Home Bancorp 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 Home Bancorp with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Bancorp and Bankwell Financial.
Diversification Opportunities for Home Bancorp and Bankwell Financial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Bankwell is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Home Bancorp 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 Home Bancorp 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 Home Bancorp i.e., Home Bancorp and Bankwell Financial go up and down completely randomly.
Pair Corralation between Home Bancorp and Bankwell Financial
Given the investment horizon of 90 days Home Bancorp is expected to generate 13.99 times less return on investment than Bankwell Financial. But when comparing it to its historical volatility, Home Bancorp is 1.21 times less risky than Bankwell Financial. It trades about 0.02 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,076 in Bankwell Financial Group on September 9, 2024 and sell it today you would earn a total of 224.00 from holding Bankwell Financial Group or generate 7.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Home Bancorp vs. Bankwell Financial Group
Performance |
Timeline |
Home Bancorp |
Bankwell Financial |
Home Bancorp and Bankwell Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Bancorp and Bankwell Financial
The main advantage of trading using opposite Home Bancorp and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Bancorp 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.Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp vs. First Capital |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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