Correlation Between OFG Bancorp and Bankwell Financial

Can any of the company-specific risk be diversified away by investing in both OFG 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 OFG 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 OFG Bancorp and Bankwell Financial Group, you can compare the effects of market volatilities on OFG 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 OFG Bancorp with a short position of Bankwell Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFG Bancorp and Bankwell Financial.

Diversification Opportunities for OFG Bancorp and Bankwell Financial

0.79

Correlation Coefficient

OFG Bancorp  Bankwell Financial

Poor diversification

The 3 months correlation between OFG and Bankwell is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding OFG 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 OFG 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 OFG 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 OFG Bancorp i.e., OFG Bancorp and Bankwell Financial go up and down completely randomly.

Pair Corralation between OFG Bancorp and Bankwell Financial

Considering the 90-day investment horizon OFG Bancorp is expected to generate 0.67 times more return on investment than Bankwell Financial. However, OFG Bancorp is 1.5 times less risky than Bankwell Financial. It trades about -0.17 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about -0.12 per unit of risk. If you would invest  4,542  in OFG Bancorp on September 29, 2024 and sell it today you would lose (222.00) from holding OFG Bancorp or give up 4.89% of portfolio value over 90 days.

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

OFG Bancorp  vs.  Bankwell Financial Group

OFG Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OFG Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, OFG Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Bankwell Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Bankwell Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with OFG Bancorp and Bankwell Financial

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

The idea behind OFG Bancorp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.