Correlation Between HomeTrust Bancshares and Bankwell Financial

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

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

Diversification Opportunities for HomeTrust Bancshares and Bankwell Financial

0.89

Correlation Coefficient

HomeTrust Bancshares  Bankwell Financial

Very poor diversification

The 3 months correlation between HomeTrust and Bankwell is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and HomeTrust Bancshares 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 HomeTrust Bancshares 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 HomeTrust Bancshares i.e., HomeTrust Bancshares and Bankwell Financial go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Bankwell Financial

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 1.65 times less return on investment than Bankwell Financial. But when comparing it to its historical volatility, HomeTrust Bancshares is 1.04 times less risky than Bankwell Financial. It trades about 0.07 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,850  in Bankwell Financial Group on September 6, 2024 and sell it today you would earn a total of  439.00  from holding Bankwell Financial Group or generate 15.4% return on investment over 90 days.

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

HomeTrust Bancshares  vs.  Bankwell Financial Group

HomeTrust Bancshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bankwell Financial

Risk-Adjusted Performance

8 of 100

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.

Pair Trading with HomeTrust Bancshares and Bankwell Financial

The main advantage of trading using opposite HomeTrust Bancshares and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeTrust Bancshares 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 HomeTrust Bancshares 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.