Correlation Between William Penn and Mountain Commerce

Can any of the company-specific risk be diversified away by investing in both William Penn and Mountain Commerce 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 Mountain Commerce 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 Mountain Commerce Bancorp, you can compare the effects of market volatilities on William Penn and Mountain Commerce 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 Mountain Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and Mountain Commerce.

Diversification Opportunities for William Penn and Mountain Commerce

0.15

Correlation Coefficient

William Penn  Mountain Commerce

Average diversification

The 3 months correlation between William and Mountain is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Mountain Commerce Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Commerce 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 Mountain Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Commerce Bancorp has no effect on the direction of William Penn i.e., William Penn and Mountain Commerce go up and down completely randomly.

Pair Corralation between William Penn and Mountain Commerce

Given the investment horizon of 90 days William Penn Bancorp is expected to generate 1.6 times more return on investment than Mountain Commerce. However, William Penn is 1.6 times more volatile than Mountain Commerce Bancorp. It trades about 0.15 of its potential returns per unit of risk. Mountain Commerce Bancorp is currently generating about 0.0 per unit of risk. If you would invest  1,180  in William Penn Bancorp on September 2, 2024 and sell it today you would earn a total of  142.00  from holding William Penn Bancorp or generate 12.03% return on investment over 90 days.

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

William Penn Bancorp  vs.  Mountain Commerce Bancorp

William Penn Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in William Penn Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, William Penn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mountain Commerce Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Commerce Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Mountain Commerce is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with William Penn and Mountain Commerce

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

The idea behind William Penn Bancorp and Mountain Commerce 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.