Correlation Between Penns Woods and First Keystone

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

Diversification Opportunities for Penns Woods and First Keystone

0.86

Correlation Coefficient

Penns Woods  First Keystone

Very poor diversification

The 3 months correlation between Penns and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and First Keystone Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Keystone Corp 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 First Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Keystone Corp has no effect on the direction of Penns Woods i.e., Penns Woods and First Keystone go up and down completely randomly.

Pair Corralation between Penns Woods and First Keystone

Given the investment horizon of 90 days Penns Woods Bancorp is expected to generate 0.61 times more return on investment than First Keystone. However, Penns Woods Bancorp is 1.65 times less risky than First Keystone. It trades about 0.32 of its potential returns per unit of risk. First Keystone Corp is currently generating about 0.18 per unit of risk. If you would invest  2,181  in Penns Woods Bancorp on September 3, 2024 and sell it today you would earn a total of  1,047  from holding Penns Woods Bancorp or generate 48.01% return on investment over 90 days.

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

Penns Woods Bancorp  vs.  First Keystone Corp

Penns Woods Bancorp

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Penns Woods Bancorp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Penns Woods exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Keystone Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Keystone Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, First Keystone unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penns Woods and First Keystone

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

The idea behind Penns Woods Bancorp and First Keystone Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.