Correlation Between Penns Woods and IF Bancorp

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

Diversification Opportunities for Penns Woods and IF Bancorp

0.88

Correlation Coefficient

Penns Woods  IF Bancorp

Very poor diversification

The 3 months correlation between Penns and IROQ is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp 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 IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Penns Woods i.e., Penns Woods and IF Bancorp go up and down completely randomly.

Pair Corralation between Penns Woods and IF Bancorp

Given the investment horizon of 90 days Penns Woods Bancorp is expected to generate 0.87 times more return on investment than IF Bancorp. However, Penns Woods Bancorp is 1.15 times less risky than IF Bancorp. It trades about 0.38 of its potential returns per unit of risk. IF Bancorp is currently generating about 0.19 per unit of risk. If you would invest  2,164  in Penns Woods Bancorp on September 13, 2024 and sell it today you would earn a total of  1,226  from holding Penns Woods Bancorp or generate 56.65% return on investment over 90 days.

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

Penns Woods Bancorp  vs.  IF Bancorp

Penns Woods Bancorp

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Penns Woods Bancorp are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Penns Woods exhibited solid returns over the last few months and may actually be approaching a breakup point.

IF Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penns Woods and IF Bancorp

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

The idea behind Penns Woods Bancorp and IF 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.