Correlation Between William Penn and Capital Bancorp

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

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

Diversification Opportunities for William Penn and Capital Bancorp

0.66

Correlation Coefficient

William Penn  Capital Bancorp

Poor diversification

The 3 months correlation between William and Capital is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp and William Penn 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 William Penn Bancorp are associated (or correlated) with Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of William Penn i.e., William Penn and Capital Bancorp go up and down completely randomly.

Pair Corralation between William Penn and Capital Bancorp

Given the investment horizon of 90 days William Penn Bancorp is expected to under-perform the Capital Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, William Penn Bancorp is 1.05 times less risky than Capital Bancorp. The stock trades about -0.09 of its potential returns per unit of risk. The Capital Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,888  in Capital Bancorp on December 26, 2024 and sell it today you would earn a total of  29.00  from holding Capital Bancorp or generate 1.0% return on investment over 90 days.

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

William Penn Bancorp  vs.  Capital Bancorp

William Penn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Capital Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Capital Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with William Penn and Capital Bancorp

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

The idea behind William Penn Bancorp and Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.