Correlation Between American National and Bankwell Financial

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

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

Diversification Opportunities for American National and Bankwell Financial

0.3

Correlation Coefficient

American National  Bankwell Financial

Weak diversification

The 3 months correlation between American and Bankwell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American National Bankshares and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and American National 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 American National Bankshares 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 American National i.e., American National and Bankwell Financial go up and down completely randomly.

Pair Corralation between American National and Bankwell Financial

If you would invest  2,885  in Bankwell Financial Group on September 3, 2024 and sell it today you would earn a total of  422.00  from holding Bankwell Financial Group or generate 14.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

American National Bankshares  vs.  Bankwell Financial Group

American National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 American National and Bankwell Financial

The main advantage of trading using opposite American National and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American National 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 American National Bankshares 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.