Correlation Between Fifth Third and William Penn

Can any of the company-specific risk be diversified away by investing in both Fifth Third and William 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 Fifth Third and William Penn into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fifth Third Bancorp and William Penn Bancorp, you can compare the effects of market volatilities on Fifth Third and William 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 Fifth Third with a short position of William Penn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and William Penn.

Diversification Opportunities for Fifth Third and William Penn

0.9

Correlation Coefficient

Fifth Third  William Penn

Almost no diversification

The 3 months correlation between Fifth and William is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and William Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Penn Bancorp and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with William Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Penn Bancorp has no effect on the direction of Fifth Third i.e., Fifth Third and William Penn go up and down completely randomly.

Pair Corralation between Fifth Third and William Penn

Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 1.28 times more return on investment than William Penn. However, Fifth Third is 1.28 times more volatile than William Penn Bancorp. It trades about 0.19 of its potential returns per unit of risk. William Penn Bancorp is currently generating about 0.12 per unit of risk. If you would invest  4,408  in Fifth Third Bancorp on August 31, 2024 and sell it today you would earn a total of  398.00  from holding Fifth Third Bancorp or generate 9.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Fifth Third Bancorp  vs.  William Penn Bancorp

Fifth Third Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third sustained solid returns over the last few months and may actually be approaching a breakup point.

William Penn Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in William Penn Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, William Penn may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fifth Third and William Penn

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

The idea behind Fifth Third Bancorp and William 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.