Correlation Between ESSA Bancorp and BankFinancial
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and BankFinancial 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 ESSA Bancorp and BankFinancial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and BankFinancial, you can compare the effects of market volatilities on ESSA Bancorp and BankFinancial 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 ESSA Bancorp with a short position of BankFinancial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and BankFinancial.
Diversification Opportunities for ESSA Bancorp and BankFinancial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and BankFinancial is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial and ESSA Bancorp 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 ESSA Bancorp are associated (or correlated) with BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and BankFinancial go up and down completely randomly.
Pair Corralation between ESSA Bancorp and BankFinancial
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.06 times less return on investment than BankFinancial. In addition to that, ESSA Bancorp is 1.63 times more volatile than BankFinancial. It trades about 0.12 of its total potential returns per unit of risk. BankFinancial is currently generating about 0.22 per unit of volatility. If you would invest 1,202 in BankFinancial on August 28, 2024 and sell it today you would earn a total of 84.00 from holding BankFinancial or generate 6.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. BankFinancial
Performance |
| Timeline |
| ESSA Bancorp |
| BankFinancial |
ESSA Bancorp and BankFinancial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and BankFinancial
The main advantage of trading using opposite ESSA Bancorp and BankFinancial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, BankFinancial 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 BankFinancial will offset losses from the drop in BankFinancial's long position.| ESSA Bancorp vs. Community West Bancshares | ESSA Bancorp vs. First Northwest Bancorp | ESSA Bancorp vs. First Community | ESSA Bancorp vs. Oak Valley Bancorp |
| BankFinancial vs. First Business Financial | BankFinancial vs. Old Point Financial | BankFinancial vs. Parke Bancorp | BankFinancial vs. Community West 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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