Correlation Between Penns Woods and Community Trust

Can any of the company-specific risk be diversified away by investing in both Penns Woods and Community Trust 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 Community Trust 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 Community Trust Bancorp, you can compare the effects of market volatilities on Penns Woods and Community Trust 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 Community Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penns Woods and Community Trust.

Diversification Opportunities for Penns Woods and Community Trust

0.83

Correlation Coefficient

Penns Woods  Community Trust

Very poor diversification

The 3 months correlation between Penns and Community is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Penns Woods Bancorp and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp 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 Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of Penns Woods i.e., Penns Woods and Community Trust go up and down completely randomly.

Pair Corralation between Penns Woods and Community Trust

Given the investment horizon of 90 days Penns Woods is expected to generate 1.65 times less return on investment than Community Trust. But when comparing it to its historical volatility, Penns Woods Bancorp is 1.08 times less risky than Community Trust. It trades about 0.05 of its potential returns per unit of risk. Community Trust Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,979  in Community Trust Bancorp on May 6, 2025 and sell it today you would earn a total of  332.00  from holding Community Trust Bancorp or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.06%
Values	Daily Returns

Penns Woods Bancorp  vs.  Community Trust Bancorp

Penns Woods Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penns Woods Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Penns Woods is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Community Trust Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community Trust Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental drivers, Community Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Penns Woods and Community Trust

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

The idea behind Penns Woods Bancorp and Community Trust 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.