Correlation Between William Penn and Hanover Bancorp

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

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

Diversification Opportunities for William Penn and Hanover Bancorp

0.63

Correlation Coefficient

William Penn  Hanover Bancorp

Poor diversification

The 3 months correlation between William and Hanover is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Hanover Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Bancorp and William Penn 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 William Penn Bancorp are associated (or correlated) with Hanover Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Bancorp has no effect on the direction of William Penn i.e., William Penn and Hanover Bancorp go up and down completely randomly.

Pair Corralation between William Penn and Hanover Bancorp

Given the investment horizon of 90 days William Penn is expected to generate 7.5 times less return on investment than Hanover Bancorp. But when comparing it to its historical volatility, William Penn Bancorp is 1.6 times less risky than Hanover Bancorp. It trades about 0.04 of its potential returns per unit of risk. Hanover Bancorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,861  in Hanover Bancorp on September 23, 2024 and sell it today you would earn a total of  513.00  from holding Hanover Bancorp or generate 27.57% return on investment over 90 days.

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

William Penn Bancorp  vs.  Hanover Bancorp

William Penn Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in William Penn Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, William Penn is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hanover Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanover Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Hanover Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with William Penn and Hanover Bancorp

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

The idea behind William Penn Bancorp and Hanover 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.