Correlation Between Mid Penn and CNB Financial

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

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

Diversification Opportunities for Mid Penn and CNB Financial

0.83

Correlation Coefficient

Mid Penn  CNB Financial

Very poor diversification

The 3 months correlation between Mid and CNB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial and Mid 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 Mid Penn Bancorp are associated (or correlated) with CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Mid Penn i.e., Mid Penn and CNB Financial go up and down completely randomly.

Pair Corralation between Mid Penn and CNB Financial

Considering the 90-day investment horizon Mid Penn Bancorp is expected to generate 0.83 times more return on investment than CNB Financial. However, Mid Penn Bancorp is 1.21 times less risky than CNB Financial. It trades about 0.04 of its potential returns per unit of risk. CNB Financial is currently generating about 0.01 per unit of risk. If you would invest  2,787  in Mid Penn Bancorp on October 25, 2024 and sell it today you would earn a total of  182.00  from holding Mid Penn Bancorp or generate 6.53% return on investment over 90 days.

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

Mid Penn Bancorp  vs.  CNB Financial

Mid Penn Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

CNB Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mid Penn and CNB Financial

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

The idea behind Mid Penn Bancorp and CNB Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.