Correlation Between Enterprise Financial and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and ESSA 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 Enterprise Financial and ESSA Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Financial Services and ESSA Bancorp, you can compare the effects of market volatilities on Enterprise Financial and ESSA 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 Enterprise Financial with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and ESSA Bancorp.
Diversification Opportunities for Enterprise Financial and ESSA Bancorp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enterprise and ESSA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Enterprise Financial 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 Enterprise Financial Services are associated (or correlated) with ESSA Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Bancorp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and ESSA Bancorp go up and down completely randomly.
Pair Corralation between Enterprise Financial and ESSA Bancorp
Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.08 times less return on investment than ESSA Bancorp. In addition to that, Enterprise Financial is 1.19 times more volatile than ESSA Bancorp. It trades about 0.19 of its total potential returns per unit of risk. ESSA Bancorp is currently generating about 0.24 per unit of volatility. If you would invest 1,950 in ESSA Bancorp on November 1, 2024 and sell it today you would earn a total of 142.00 from holding ESSA Bancorp or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Financial Services vs. ESSA Bancorp
Performance |
| Timeline |
| Enterprise Financial |
| ESSA Bancorp |
Enterprise Financial and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Financial and ESSA Bancorp
The main advantage of trading using opposite Enterprise Financial and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Financial position performs unexpectedly, ESSA 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 ESSA Bancorp will offset losses from the drop in ESSA Bancorp's long position.| Enterprise Financial vs. Home Federal Bancorp | Enterprise Financial vs. Magyar Bancorp | Enterprise Financial vs. First Capital | Enterprise Financial vs. HomeTrust Bancshares |
| ESSA Bancorp vs. Home Federal Bancorp | ESSA Bancorp vs. Magyar Bancorp | ESSA Bancorp vs. First Capital | ESSA Bancorp vs. HomeTrust Bancshares |
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.
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