Correlation Between Penns Woods and FNB

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

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

Diversification Opportunities for Penns Woods and FNB

0.26

Correlation Coefficient

Penns Woods  FNB

Modest diversification

The 3 months correlation between Penns and FNB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc and Penns Woods 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 Penns Woods Bancorp are associated (or correlated) with FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of Penns Woods i.e., Penns Woods and FNB go up and down completely randomly.

Pair Corralation between Penns Woods and FNB

Given the investment horizon of 90 days Penns Woods Bancorp is expected to generate 1.65 times more return on investment than FNB. However, Penns Woods is 1.65 times more volatile than FNB Inc. It trades about -0.06 of its potential returns per unit of risk. FNB Inc is currently generating about -0.12 per unit of risk. If you would invest  3,005  in Penns Woods Bancorp on December 27, 2024 and sell it today you would lose (158.00) from holding Penns Woods Bancorp or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Penns Woods Bancorp  vs.  FNB Inc

Penns Woods Bancorp

Risk-Adjusted Performance

Very Weak

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

FNB Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNB Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Penns Woods and FNB

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

The idea behind Penns Woods Bancorp and FNB Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.