Correlation Between Pioneer Bankcorp and Potomac Bancshares

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

By analyzing existing cross correlation between Pioneer Bankcorp and Potomac Bancshares, you can compare the effects of market volatilities on Pioneer Bankcorp and Potomac Bancshares 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 Pioneer Bankcorp with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Bankcorp and Potomac Bancshares.

Diversification Opportunities for Pioneer Bankcorp and Potomac Bancshares

-0.31

Correlation Coefficient

Pioneer Bankcorp  Potomac Bancshares

Very good diversification

The 3 months correlation between Pioneer and Potomac is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Bankcorp and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and Pioneer Bankcorp 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 Pioneer Bankcorp are associated (or correlated) with Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of Pioneer Bankcorp i.e., Pioneer Bankcorp and Potomac Bancshares go up and down completely randomly.

Pair Corralation between Pioneer Bankcorp and Potomac Bancshares

Given the investment horizon of 90 days Pioneer Bankcorp is expected to generate 0.26 times more return on investment than Potomac Bancshares. However, Pioneer Bankcorp is 3.83 times less risky than Potomac Bancshares. It trades about 0.25 of its potential returns per unit of risk. Potomac Bancshares is currently generating about -0.04 per unit of risk. If you would invest  4,800  in Pioneer Bankcorp on December 11, 2024 and sell it today you would earn a total of  500.00  from holding Pioneer Bankcorp or generate 10.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Pioneer Bankcorp  vs.  Potomac Bancshares

Pioneer Bankcorp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Bankcorp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking signals, Pioneer Bankcorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Potomac Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Potomac Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Potomac Bancshares is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pioneer Bankcorp and Potomac Bancshares

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

The idea behind Pioneer Bankcorp and Potomac Bancshares 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.