Correlation Between Diamond Hill and Bankwell Financial

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

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

Diversification Opportunities for Diamond Hill and Bankwell Financial

0.73

Correlation Coefficient

Diamond Hill  Bankwell Financial

Poor diversification

The 3 months correlation between Diamond and Bankwell is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Bankwell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankwell Financial and Diamond Hill 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 Diamond Hill Investment 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 Diamond Hill i.e., Diamond Hill and Bankwell Financial go up and down completely randomly.

Pair Corralation between Diamond Hill and Bankwell Financial

Given the investment horizon of 90 days Diamond Hill is expected to generate 3.81 times less return on investment than Bankwell Financial. In addition to that, Diamond Hill is 1.02 times more volatile than Bankwell Financial Group. It trades about 0.04 of its total potential returns per unit of risk. Bankwell Financial Group is currently generating about 0.16 per unit of volatility. If you would invest  3,379  in Bankwell Financial Group on May 7, 2025 and sell it today you would earn a total of  614.00  from holding Bankwell Financial Group or generate 18.17% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Bankwell Financial Group

Diamond Hill Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bankwell Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bankwell Financial Group are ranked lower than 12 (%) 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.

Pair Trading with Diamond Hill and Bankwell Financial

The main advantage of trading using opposite Diamond Hill and Bankwell Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill 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 Diamond Hill Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.