Correlation Between William Penn and BFC Capital
Can any of the company-specific risk be diversified away by investing in both William Penn and BFC Capital 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 BFC Capital 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 BFC Capital Trust, you can compare the effects of market volatilities on William Penn and BFC Capital 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 BFC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and BFC Capital.
Diversification Opportunities for William Penn and BFC Capital
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between William and BFC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and BFC Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFC Capital Trust 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 BFC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFC Capital Trust has no effect on the direction of William Penn i.e., William Penn and BFC Capital go up and down completely randomly.
Pair Corralation between William Penn and BFC Capital
Given the investment horizon of 90 days William Penn Bancorp is expected to generate 1.83 times more return on investment than BFC Capital. However, William Penn is 1.83 times more volatile than BFC Capital Trust. It trades about 0.16 of its potential returns per unit of risk. BFC Capital Trust is currently generating about 0.05 per unit of risk. If you would invest 1,184 in William Penn Bancorp on August 28, 2024 and sell it today you would earn a total of 159.00 from holding William Penn Bancorp or generate 13.43% 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. BFC Capital Trust
Performance |
| Timeline |
| William Penn Bancorp |
| BFC Capital Trust |
William Penn and BFC Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with William Penn and BFC Capital
The main advantage of trading using opposite William Penn and BFC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn position performs unexpectedly, BFC Capital 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 BFC Capital will offset losses from the drop in BFC Capital's long position.| William Penn vs. Fifth Third Bancorp | William Penn vs. Zions Bancorporation | William Penn vs. Huntington Bancshares Incorporated | William Penn vs. Comerica |
| BFC Capital vs. Popular Capital Trust | BFC Capital vs. CHS Inc CN | BFC Capital vs. Wintrust Financial Corp | BFC Capital vs. Auburn National Bancorporation |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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