Correlation Between Mid Penn and ST Bancorp

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

Diversification Opportunities for Mid Penn and ST Bancorp

0.25

Correlation Coefficient

Mid Penn  ST Bancorp

Modest diversification

The 3 months correlation between Mid and STBA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp 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 ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Mid Penn i.e., Mid Penn and ST Bancorp go up and down completely randomly.

Pair Corralation between Mid Penn and ST Bancorp

Considering the 90-day investment horizon Mid Penn Bancorp is expected to generate 0.71 times more return on investment than ST Bancorp. However, Mid Penn Bancorp is 1.4 times less risky than ST Bancorp. It trades about 0.09 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.02 per unit of risk. If you would invest  2,925  in Mid Penn Bancorp on September 3, 2024 and sell it today you would earn a total of  280.00  from holding Mid Penn Bancorp or generate 9.57% return on investment over 90 days.

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

Mid Penn Bancorp  vs.  ST Bancorp

Mid Penn Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Penn Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mid Penn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ST Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ST Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, ST Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Penn and ST Bancorp

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

The idea behind Mid Penn Bancorp and ST 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.