Correlation Between William Penn and Mid Penn

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

Diversification Opportunities for William Penn and Mid Penn

0.95

Correlation Coefficient

William Penn  Mid Penn

Almost no diversification

The 3 months correlation between William and Mid is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Mid Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Penn 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 Mid Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Penn Bancorp has no effect on the direction of William Penn i.e., William Penn and Mid Penn go up and down completely randomly.

Pair Corralation between William Penn and Mid Penn

Given the investment horizon of 90 days William Penn Bancorp is expected to generate 1.03 times more return on investment than Mid Penn. However, William Penn is 1.03 times more volatile than Mid Penn Bancorp. It trades about -0.08 of its potential returns per unit of risk. Mid Penn Bancorp is currently generating about -0.09 per unit of risk. If you would invest  1,199  in William Penn Bancorp on December 27, 2024 and sell it today you would lose (98.00) from holding William Penn Bancorp or give up 8.17% of portfolio value over 90 days.

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

William Penn Bancorp  vs.  Mid Penn 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 weak 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.

Mid Penn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with William Penn and Mid Penn

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

The idea behind William Penn Bancorp and Mid Penn 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.