Correlation Between Franklin Financial and Bankwell Financial

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

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

Diversification Opportunities for Franklin Financial and Bankwell Financial

0.06

Correlation Coefficient

Franklin Financial  Bankwell Financial

Significant diversification

The 3 months correlation between Franklin and Bankwell is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Financial Services and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Franklin 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 Franklin Financial Services 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 Franklin Financial i.e., Franklin Financial and Bankwell Financial go up and down completely randomly.

Pair Corralation between Franklin Financial and Bankwell Financial

Given the investment horizon of 90 days Franklin Financial Services is expected to generate 1.01 times more return on investment than Bankwell Financial. However, Franklin Financial is 1.01 times more volatile than Bankwell Financial Group. It trades about 0.29 of its potential returns per unit of risk. Bankwell Financial Group is currently generating about -0.09 per unit of risk. If you would invest  2,544  in Franklin Financial Services on February 4, 2024 and sell it today you would earn a total of  338.00  from holding Franklin Financial Services or generate 13.29% return on investment over 90 days.

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

Franklin Financial Services  vs.  Bankwell Financial Group

Franklin Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bankwell Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankwell Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Franklin Financial and Bankwell Financial

The main advantage of trading using opposite Franklin Financial and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Financial 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 Franklin Financial Services 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.