Correlation Between National Bank and William Penn

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

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

Diversification Opportunities for National Bank and William Penn

0.87

Correlation Coefficient

National Bank  William Penn

Very poor diversification

The 3 months correlation between National and William is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and William Penn go up and down completely randomly.

Pair Corralation between National Bank and William Penn

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the William Penn. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.12 times less risky than William Penn. The stock trades about -0.11 of its potential returns per unit of risk. The William Penn Bancorp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,198  in William Penn Bancorp on December 29, 2024 and sell it today you would lose (112.00) from holding William Penn Bancorp or give up 9.35% of portfolio value over 90 days.

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

National Bank Holdings  vs.  William Penn Bancorp

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 National Bank and William Penn

The main advantage of trading using opposite National Bank and William Penn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.