Correlation Between Wintrust Financial and BFC Capital

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

By analyzing existing cross correlation between Wintrust Financial Corp and BFC Capital Trust, you can compare the effects of market volatilities on Wintrust Financial and BFC Capital 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 Wintrust Financial with a short position of BFC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wintrust Financial and BFC Capital.

Diversification Opportunities for Wintrust Financial and BFC Capital

0.69

Correlation Coefficient

Wintrust Financial  BFC Capital

Poor diversification

The 3 months correlation between Wintrust and BFC is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wintrust Financial Corp and BFC Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFC Capital Trust and Wintrust Financial 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 Wintrust Financial Corp are associated (or correlated) with BFC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFC Capital Trust has no effect on the direction of Wintrust Financial i.e., Wintrust Financial and BFC Capital go up and down completely randomly.

Pair Corralation between Wintrust Financial and BFC Capital

Assuming the 90 days horizon Wintrust Financial is expected to generate 2.22 times less return on investment than BFC Capital. But when comparing it to its historical volatility, Wintrust Financial Corp is 5.2 times less risky than BFC Capital. It trades about 0.15 of its potential returns per unit of risk. BFC Capital Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,521  in BFC Capital Trust on December 29, 2024 and sell it today you would earn a total of  97.00  from holding BFC Capital Trust or generate 3.85% return on investment over 90 days.

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

Wintrust Financial Corp  vs.  BFC Capital Trust

Wintrust Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wintrust Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Wintrust Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BFC Capital Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BFC Capital Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, BFC Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Wintrust Financial and BFC Capital

The main advantage of trading using opposite Wintrust Financial and BFC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wintrust Financial position performs unexpectedly, BFC Capital 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 BFC Capital will offset losses from the drop in BFC Capital's long position.

The idea behind Wintrust Financial Corp and BFC Capital Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .