Correlation Between Bankwell Financial and Unity Bancorp

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

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

Diversification Opportunities for Bankwell Financial and Unity Bancorp

0.36

Correlation Coefficient

Bankwell Financial  Unity Bancorp

Weak diversification

The 3 months correlation between Bankwell and Unity is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bankwell Financial Group and Unity Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Bancorp and Bankwell 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 Bankwell Financial Group are associated (or correlated) with Unity Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Bancorp has no effect on the direction of Bankwell Financial i.e., Bankwell Financial and Unity Bancorp go up and down completely randomly.

Pair Corralation between Bankwell Financial and Unity Bancorp

Given the investment horizon of 90 days Bankwell Financial Group is expected to generate 0.79 times more return on investment than Unity Bancorp. However, Bankwell Financial Group is 1.27 times less risky than Unity Bancorp. It trades about 0.24 of its potential returns per unit of risk. Unity Bancorp is currently generating about 0.03 per unit of risk. If you would invest  3,630  in Bankwell Financial Group on July 1, 2025 and sell it today you would earn a total of  948.00  from holding Bankwell Financial Group or generate 26.12% return on investment over 90 days.

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

Bankwell Financial Group  vs.  Unity Bancorp

Bankwell Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Bankwell Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Unity Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Unity Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bankwell Financial and Unity Bancorp

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

The idea behind Bankwell Financial Group and Unity Bancorp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.