Correlation Between Central Valley and Penns Woods

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

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

Diversification Opportunities for Central Valley and Penns Woods

0.58

Correlation Coefficient

Central Valley  Penns Woods

Very weak diversification

The 3 months correlation between Central and Penns is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Central Valley Community and Penns Woods Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penns Woods Bancorp and Central Valley 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 Central Valley Community are associated (or correlated) with Penns Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penns Woods Bancorp has no effect on the direction of Central Valley i.e., Central Valley and Penns Woods go up and down completely randomly.

Pair Corralation between Central Valley and Penns Woods

If you would invest  2,181  in Penns Woods Bancorp on September 3, 2024 and sell it today you would earn a total of  1,047  from holding Penns Woods Bancorp or generate 48.01% return on investment over 90 days.

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

Central Valley Community  vs.  Penns Woods Bancorp

Central Valley Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Valley Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Central Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Penns Woods Bancorp

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Penns Woods Bancorp are ranked lower than 25 (%) 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.

Pair Trading with Central Valley and Penns Woods

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

The idea behind Central Valley Community and Penns Woods 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.