Correlation Between Provident Bancorp and Peoples Bancorp

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

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

Diversification Opportunities for Provident Bancorp and Peoples Bancorp

0.65

Correlation Coefficient

Provident Bancorp  Peoples Bancorp

Poor diversification

The 3 months correlation between Provident and Peoples is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Provident Bancorp and Peoples Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Bancorp and Provident Bancorp 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 Provident Bancorp are associated (or correlated) with Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of Provident Bancorp i.e., Provident Bancorp and Peoples Bancorp go up and down completely randomly.

Pair Corralation between Provident Bancorp and Peoples Bancorp

Given the investment horizon of 90 days Provident Bancorp is expected to generate 1.17 times more return on investment than Peoples Bancorp. However, Provident Bancorp is 1.17 times more volatile than Peoples Bancorp. It trades about -0.01 of its potential returns per unit of risk. Peoples Bancorp is currently generating about -0.32 per unit of risk. If you would invest  1,149  in Provident Bancorp on October 5, 2024 and sell it today you would lose (9.00) from holding Provident Bancorp or give up 0.78% of portfolio value over 90 days.

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

Provident Bancorp  vs.  Peoples Bancorp

Provident Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Provident Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Peoples Bancorp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Peoples Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Provident Bancorp and Peoples Bancorp

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

The idea behind Provident Bancorp and Peoples 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.