Correlation Between Penns Woods and Popular

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

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

Diversification Opportunities for Penns Woods and Popular

-0.23

Correlation Coefficient

Penns Woods  Popular

Very good diversification

The 3 months correlation between Penns and Popular is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and Popular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Popular and Penns Woods 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 Penns Woods Bancorp are associated (or correlated) with Popular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Popular has no effect on the direction of Penns Woods i.e., Penns Woods and Popular go up and down completely randomly.

Pair Corralation between Penns Woods and Popular

Given the investment horizon of 90 days Penns Woods is expected to generate 1.56 times less return on investment than Popular. But when comparing it to its historical volatility, Penns Woods Bancorp is 2.51 times less risky than Popular. It trades about 0.05 of its potential returns per unit of risk. Popular is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,199  in Popular on September 18, 2024 and sell it today you would earn a total of  203.00  from holding Popular or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.35%
Values	Daily Returns

Penns Woods Bancorp  vs.  Popular

Penns Woods Bancorp

Risk-Adjusted Performance

27 of 100

Strong

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

Popular

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Popular is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Penns Woods and Popular

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

The idea behind Penns Woods Bancorp and Popular 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.