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
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Middlefield and Bankwell is 0.7. 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 1.2 times more return on investment than Bankwell Financial. However, Middlefield Banc is 1.2 times more volatile than Bankwell Financial Group. It trades about 0.13 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 2,503 in Middlefield Banc on September 6, 2024 and sell it today you would earn a total of 576.00 from holding Middlefield Banc or generate 23.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Middlefield Banc vs. Bankwell Financial Group
Performance |
Timeline |
Middlefield Banc |
Bankwell Financial |
Middlefield Banc and Bankwell Financial Volatility Contrast
Predicted Return Density |
Returns |
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.Middlefield Banc vs. Community West Bancshares | Middlefield Banc vs. Civista Bancshares | Middlefield Banc vs. Home Federal Bancorp | Middlefield Banc vs. LINKBANCORP |
Bankwell Financial vs. Community West Bancshares | Bankwell Financial vs. Civista Bancshares | Bankwell Financial vs. Home Federal Bancorp | Bankwell Financial vs. LINKBANCORP |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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