Correlation Between Ponce Financial and Finwise Bancorp

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

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

Diversification Opportunities for Ponce Financial and Finwise Bancorp

0.8

Correlation Coefficient

Ponce Financial  Finwise Bancorp

Very poor diversification

The 3 months correlation between Ponce and Finwise is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ponce Financial Group and Finwise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finwise Bancorp and Ponce 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 Ponce Financial Group are associated (or correlated) with Finwise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finwise Bancorp has no effect on the direction of Ponce Financial i.e., Ponce Financial and Finwise Bancorp go up and down completely randomly.

Pair Corralation between Ponce Financial and Finwise Bancorp

Given the investment horizon of 90 days Ponce Financial is expected to generate 2.3 times less return on investment than Finwise Bancorp. In addition to that, Ponce Financial is 1.06 times more volatile than Finwise Bancorp. It trades about 0.14 of its total potential returns per unit of risk. Finwise Bancorp is currently generating about 0.34 per unit of volatility. If you would invest  1,287  in Finwise Bancorp on September 2, 2024 and sell it today you would earn a total of  571.00  from holding Finwise Bancorp or generate 44.37% return on investment over 90 days.

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

Ponce Financial Group  vs.  Finwise Bancorp

Ponce Financial Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ponce Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Ponce Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Finwise Bancorp

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Finwise Bancorp are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Finwise Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ponce Financial and Finwise Bancorp

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

The idea behind Ponce Financial Group and Finwise 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.