Correlation Between Woodlands Financial and Penns Woods

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

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

Diversification Opportunities for Woodlands Financial and Penns Woods

0.33

Correlation Coefficient

Woodlands Financial  Penns Woods

Weak diversification

The 3 months correlation between Woodlands and Penns is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Woodlands Financial Services and Penns Woods Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penns Woods Bancorp and Woodlands Financial 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 Woodlands Financial Services are associated (or correlated) with Penns Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penns Woods Bancorp has no effect on the direction of Woodlands Financial i.e., Woodlands Financial and Penns Woods go up and down completely randomly.

Pair Corralation between Woodlands Financial and Penns Woods

Given the investment horizon of 90 days Woodlands Financial is expected to generate 22.61 times less return on investment than Penns Woods. But when comparing it to its historical volatility, Woodlands Financial Services is 1.08 times less risky than Penns Woods. It trades about 0.02 of its potential returns per unit of risk. Penns Woods Bancorp is currently generating about 0.32 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Woodlands Financial Services  vs.  Penns Woods Bancorp

Woodlands Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Woodlands Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Woodlands Financial and Penns Woods

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

The idea behind Woodlands Financial Services and Penns Woods 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.