Correlation Between ESSA Bancorp and First Foundation
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and First Foundation 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 First Foundation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and First Foundation, you can compare the effects of market volatilities on ESSA Bancorp and First Foundation 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 First Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and First Foundation.
Diversification Opportunities for ESSA Bancorp and First Foundation
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and First Foundation go up and down completely randomly.
Pair Corralation between ESSA Bancorp and First Foundation
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.86 times less return on investment than First Foundation. But when comparing it to its historical volatility, ESSA Bancorp is 1.85 times less risky than First Foundation. It trades about 0.2 of its potential returns per unit of risk. First Foundation is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 673.00 in First Foundation on September 1, 2024 and sell it today you would earn a total of 122.00 from holding First Foundation or generate 18.13% 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. First Foundation
Performance |
| Timeline |
| ESSA Bancorp |
| First Foundation |
ESSA Bancorp and First Foundation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and First Foundation
The main advantage of trading using opposite ESSA Bancorp and First Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, First Foundation 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 First Foundation will offset losses from the drop in First Foundation'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 |
| First Foundation vs. Veritex Holdings | First Foundation vs. ConnectOne Bancorp | First Foundation vs. The First Bancshares, | First Foundation vs. First Mid Illinois |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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