Correlation Between ESSA Bancorp and Evans Bancorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Evans 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 ESSA Bancorp and Evans Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Evans Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and Evans 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 ESSA Bancorp with a short position of Evans Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Evans Bancorp.
Diversification Opportunities for ESSA Bancorp and Evans Bancorp
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and Evans is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Evans Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evans Bancorp 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 Evans Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evans Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Evans Bancorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Evans Bancorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.49 times less return on investment than Evans Bancorp. But when comparing it to its historical volatility, ESSA Bancorp is 1.14 times less risky than Evans Bancorp. It trades about 0.14 of its potential returns per unit of risk. Evans Bancorp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,003 in Evans Bancorp on August 27, 2024 and sell it today you would earn a total of 413.00 from holding Evans Bancorp or generate 10.32% 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. Evans Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| Evans Bancorp |
ESSA Bancorp and Evans Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Evans Bancorp
The main advantage of trading using opposite ESSA Bancorp and Evans Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Evans 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 Evans Bancorp will offset losses from the drop in Evans Bancorp's long position.| ESSA Bancorp vs. Fifth Third Bancorp | ESSA Bancorp vs. Zions Bancorporation | ESSA Bancorp vs. Huntington Bancshares Incorporated | ESSA Bancorp vs. Comerica |
| Evans Bancorp vs. First Community | Evans Bancorp vs. Oak Valley Bancorp | Evans Bancorp vs. First Financial Northwest | Evans Bancorp vs. ESSA Bancorp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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