Correlation Between William Penn and Territorial Bancorp

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

Diversification Opportunities for William Penn and Territorial Bancorp

0.54

Correlation Coefficient

William Penn  Territorial Bancorp

Very weak diversification

The 3 months correlation between William and Territorial is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp 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 Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of William Penn i.e., William Penn and Territorial Bancorp go up and down completely randomly.

Pair Corralation between William Penn and Territorial Bancorp

Given the investment horizon of 90 days William Penn Bancorp is expected to generate 0.73 times more return on investment than Territorial Bancorp. However, William Penn Bancorp is 1.37 times less risky than Territorial Bancorp. It trades about -0.33 of its potential returns per unit of risk. Territorial Bancorp is currently generating about -0.29 per unit of risk. If you would invest  1,343  in William Penn Bancorp on September 26, 2024 and sell it today you would lose (131.00) from holding William Penn Bancorp or give up 9.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

William Penn Bancorp  vs.  Territorial Bancorp

William Penn Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days William Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, William Penn is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Territorial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Territorial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Territorial Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with William Penn and Territorial Bancorp

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

The idea behind William Penn Bancorp and Territorial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.