Correlation Between Middlefield Banc and Bankwell Financial

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

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

Diversification Opportunities for Middlefield Banc and Bankwell Financial

0.71

Correlation Coefficient

Middlefield Banc  Bankwell Financial

Poor diversification

The 3 months correlation between Middlefield and Bankwell is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc i.e., Middlefield Banc and Bankwell Financial go up and down completely randomly.

Pair Corralation between Middlefield Banc and Bankwell Financial

Given the investment horizon of 90 days Middlefield Banc is expected to generate 1.19 times more return on investment than Bankwell Financial. However, Middlefield Banc is 1.19 times more volatile than Bankwell Financial Group. It trades about 0.11 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.1 per unit of risk. If you would invest  2,570  in Middlefield Banc on September 9, 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	100.0%
Values	Daily Returns

Middlefield Banc  vs.  Bankwell Financial Group

Middlefield Banc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Middlefield Banc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Middlefield Banc displayed solid returns over the last few months and may actually be approaching a breakup point.

Bankwell Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 7 (%) 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 Middlefield Banc and Bankwell Financial

The main advantage of trading using opposite Middlefield Banc and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlefield Banc 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 Middlefield Banc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.