Correlation Between William Penn and US Bancorp
Can any of the company-specific risk be diversified away by investing in both William Penn and US 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 US 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 US Bancorp PERP, you can compare the effects of market volatilities on William Penn and US 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and US Bancorp.
Diversification Opportunities for William Penn and US Bancorp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between William and USB-PA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and US Bancorp PERP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp PERP 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp PERP has no effect on the direction of William Penn i.e., William Penn and US Bancorp go up and down completely randomly.
Pair Corralation between William Penn and US Bancorp
Given the investment horizon of 90 days William Penn is expected to generate 1.03 times less return on investment than US Bancorp. In addition to that, William Penn is 1.46 times more volatile than US Bancorp PERP. It trades about 0.07 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.11 per unit of volatility. If you would invest 63,331 in US Bancorp PERP on August 31, 2024 and sell it today you would earn a total of 25,439 from holding US Bancorp PERP or generate 40.17% 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. US Bancorp PERP
Performance |
| Timeline |
| William Penn Bancorp |
| US Bancorp PERP |
William Penn and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with William Penn and US Bancorp
The main advantage of trading using opposite William Penn and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp'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 |
| US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial | US Bancorp vs. US Bancorp | US Bancorp vs. KeyCorp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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