Correlation Between ESSA Bancorp and Colony Bankcorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Colony Bankcorp 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 Colony Bankcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Colony Bankcorp, you can compare the effects of market volatilities on ESSA Bancorp and Colony Bankcorp 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 Colony Bankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Colony Bankcorp.
Diversification Opportunities for ESSA Bancorp and Colony Bankcorp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and Colony is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp 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 Colony Bankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colony Bankcorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Colony Bankcorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Colony Bankcorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.71 times less return on investment than Colony Bankcorp. In addition to that, ESSA Bancorp is 1.27 times more volatile than Colony Bankcorp. It trades about 0.01 of its total potential returns per unit of risk. Colony Bankcorp is currently generating about 0.05 per unit of volatility. If you would invest 1,249 in Colony Bankcorp on August 27, 2024 and sell it today you would earn a total of 508.00 from holding Colony Bankcorp or generate 40.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. Colony Bankcorp
Performance |
| Timeline |
| ESSA Bancorp |
| Colony Bankcorp |
ESSA Bancorp and Colony Bankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Colony Bankcorp
The main advantage of trading using opposite ESSA Bancorp and Colony Bankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Colony Bankcorp 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 Colony Bankcorp will offset losses from the drop in Colony Bankcorp's long position.| ESSA Bancorp vs. Fifth Third Bancorp | ESSA Bancorp vs. Zions Bancorporation | ESSA Bancorp vs. Huntington Bancshares Incorporated | ESSA Bancorp vs. Comerica |
| Colony Bankcorp vs. Home Federal Bancorp | Colony Bankcorp vs. First Financial Northwest | Colony Bankcorp vs. First Northwest Bancorp | Colony Bankcorp vs. First Capital |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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