Correlation Between LCNB and William Penn

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

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

Diversification Opportunities for LCNB and William Penn

0.46

Correlation Coefficient

LCNB  William Penn

Very weak diversification

The 3 months correlation between LCNB and William is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LCNB Corp. and William Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Penn Bancorp and LCNB 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 LCNB Corporation are associated (or correlated) with William Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Penn Bancorp has no effect on the direction of LCNB i.e., LCNB and William Penn go up and down completely randomly.

Pair Corralation between LCNB and William Penn

Given the investment horizon of 90 days LCNB Corporation is expected to generate 0.96 times more return on investment than William Penn. However, LCNB Corporation is 1.04 times less risky than William Penn. It trades about -0.03 of its potential returns per unit of risk. William Penn Bancorp is currently generating about -0.09 per unit of risk. If you would invest  1,514  in LCNB Corporation on December 25, 2024 and sell it today you would lose (53.00) from holding LCNB Corporation or give up 3.5% of portfolio value over 90 days.

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

LCNB Corp.  vs.  William Penn Bancorp

LCNB

Risk-Adjusted Performance

Very Weak

Over the last 90 days LCNB Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LCNB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

William Penn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with LCNB and William Penn

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

The idea behind LCNB Corporation and William Penn 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.