Correlation Between Penns Woods and Chesapeake Granite

Can any of the company-specific risk be diversified away by investing in both Penns Woods and Chesapeake Granite 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 Chesapeake Granite 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 Chesapeake Granite Wash, you can compare the effects of market volatilities on Penns Woods and Chesapeake Granite 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 Chesapeake Granite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penns Woods and Chesapeake Granite.

Diversification Opportunities for Penns Woods and Chesapeake Granite

0.77

Correlation Coefficient

Penns Woods  Chesapeake Granite

Poor diversification

The 3 months correlation between Penns and Chesapeake is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and Chesapeake Granite Wash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Granite Wash 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 Chesapeake Granite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Granite Wash has no effect on the direction of Penns Woods i.e., Penns Woods and Chesapeake Granite go up and down completely randomly.

Pair Corralation between Penns Woods and Chesapeake Granite

If you would invest  2,336  in Penns Woods Bancorp on September 27, 2024 and sell it today you would earn a total of  733.00  from holding Penns Woods Bancorp or generate 31.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Penns Woods Bancorp  vs.  Chesapeake Granite Wash

Penns Woods Bancorp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Penns Woods Bancorp are ranked lower than 16 (%) 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.

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Penns Woods and Chesapeake Granite

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

The idea behind Penns Woods Bancorp and Chesapeake Granite Wash 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.