Correlation Between Penns Woods and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both Penns Woods and Westamerica Bancorporation 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 Westamerica Bancorporation 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 Westamerica Bancorporation, you can compare the effects of market volatilities on Penns Woods and Westamerica Bancorporation 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 Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penns Woods and Westamerica Bancorporation.
Diversification Opportunities for Penns Woods and Westamerica Bancorporation
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Penns and Westamerica is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Penns Woods i.e., Penns Woods and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between Penns Woods and Westamerica Bancorporation
Given the investment horizon of 90 days Penns Woods Bancorp is expected to generate 0.79 times more return on investment than Westamerica Bancorporation. However, Penns Woods Bancorp is 1.27 times less risky than Westamerica Bancorporation. It trades about 0.37 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.18 per unit of risk. If you would invest 2,594 in Penns Woods Bancorp on August 27, 2024 and sell it today you would earn a total of 525.00 from holding Penns Woods Bancorp or generate 20.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penns Woods Bancorp vs. Westamerica Bancorp.
Performance |
| Timeline |
| Penns Woods Bancorp |
| Westamerica Bancorporation |
Penns Woods and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penns Woods and Westamerica Bancorporation
The main advantage of trading using opposite Penns Woods and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penns Woods position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation's long position.| Penns Woods vs. 1st Source | Penns Woods vs. Great Southern Bancorp | Penns Woods vs. Waterstone Financial | Penns Woods vs. First Community |
| Westamerica Bancorporation vs. Heritage Commerce Corp | Westamerica Bancorporation vs. Heritage Financial | Westamerica Bancorporation vs. Penns Woods Bancorp | Westamerica Bancorporation vs. 1st Source |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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