Correlation Between FNB and Penns Woods

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

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

Diversification Opportunities for FNB and Penns Woods

0.26

Correlation Coefficient

FNB  Penns Woods

Modest diversification

The 3 months correlation between FNB and Penns is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding FNB Inc 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 FNB 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 FNB Inc 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 FNB i.e., FNB and Penns Woods go up and down completely randomly.

Pair Corralation between FNB and Penns Woods

Given the investment horizon of 90 days FNB Inc is expected to under-perform the Penns Woods. But the pink sheet apears to be less risky and, when comparing its historical volatility, FNB Inc is 1.65 times less risky than Penns Woods. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Penns Woods Bancorp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,005  in Penns Woods Bancorp on December 27, 2024 and sell it today you would lose (158.00) from holding Penns Woods Bancorp or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

FNB Inc  vs.  Penns Woods Bancorp

FNB Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNB Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Penns Woods Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penns Woods Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Penns Woods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FNB and Penns Woods

The main advantage of trading using opposite FNB and Penns Woods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FNB 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 FNB Inc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.