Correlation Between ESSA Bancorp and CF Financial
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and CF Financial 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 CF Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and CF Financial, you can compare the effects of market volatilities on ESSA Bancorp and CF Financial 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 CF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and CF Financial.
Diversification Opportunities for ESSA Bancorp and CF Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and CFFI is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial 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 CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and CF Financial go up and down completely randomly.
Pair Corralation between ESSA Bancorp and CF Financial
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.09 times less return on investment than CF Financial. But when comparing it to its historical volatility, ESSA Bancorp is 1.08 times less risky than CF Financial. It trades about 0.04 of its potential returns per unit of risk. CF Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,319 in CF Financial on September 1, 2024 and sell it today you would earn a total of 1,878 from holding CF Financial or generate 35.31% 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. CF Financial
Performance |
| Timeline |
| ESSA Bancorp |
| CF Financial |
ESSA Bancorp and CF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and CF Financial
The main advantage of trading using opposite ESSA Bancorp and CF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, CF Financial 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 CF Financial will offset losses from the drop in CF Financial'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 |
| CF Financial vs. Home Federal Bancorp | CF Financial vs. First Financial Northwest | CF Financial vs. First Northwest Bancorp | CF Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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