Correlation Between William Penn and 1st Source
Can any of the company-specific risk be diversified away by investing in both William Penn and 1st Source 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 1st Source 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 1st Source, you can compare the effects of market volatilities on William Penn and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and 1st Source.
Diversification Opportunities for William Penn and 1st Source
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between William and 1st is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of William Penn i.e., William Penn and 1st Source go up and down completely randomly.
Pair Corralation between William Penn and 1st Source
Given the investment horizon of 90 days William Penn is expected to generate 2.68 times less return on investment than 1st Source. But when comparing it to its historical volatility, William Penn Bancorp is 1.84 times less risky than 1st Source. It trades about 0.12 of its potential returns per unit of risk. 1st Source is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,887 in 1st Source on September 1, 2024 and sell it today you would earn a total of 602.00 from holding 1st Source or generate 10.23% 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. 1st Source
Performance |
| Timeline |
| William Penn Bancorp |
| 1st Source |
William Penn and 1st Source Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with William Penn and 1st Source
The main advantage of trading using opposite William Penn and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.| William Penn vs. Home Federal Bancorp | William Penn vs. First Financial Northwest | William Penn vs. First Northwest Bancorp | William Penn vs. First Capital |
| 1st Source vs. Penns Woods Bancorp | 1st Source vs. Great Southern Bancorp | 1st Source vs. Waterstone Financial | 1st Source vs. Chemung Financial Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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