Correlation Between ESSA Bancorp and FVCBankcorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and FVCBankcorp 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 FVCBankcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and FVCBankcorp, you can compare the effects of market volatilities on ESSA Bancorp and FVCBankcorp 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 FVCBankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and FVCBankcorp.
Diversification Opportunities for ESSA Bancorp and FVCBankcorp
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ESSA and FVCBankcorp is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp 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 FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and FVCBankcorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and FVCBankcorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.25 times less return on investment than FVCBankcorp. But when comparing it to its historical volatility, ESSA Bancorp is 1.28 times less risky than FVCBankcorp. It trades about 0.04 of its potential returns per unit of risk. FVCBankcorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,045 in FVCBankcorp on August 31, 2024 and sell it today you would earn a total of 393.00 from holding FVCBankcorp or generate 37.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. FVCBankcorp
Performance |
| Timeline |
| ESSA Bancorp |
| FVCBankcorp |
ESSA Bancorp and FVCBankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and FVCBankcorp
The main advantage of trading using opposite ESSA Bancorp and FVCBankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, FVCBankcorp 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 FVCBankcorp will offset losses from the drop in FVCBankcorp'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 |
| FVCBankcorp vs. KeyCorp | FVCBankcorp vs. Comerica | FVCBankcorp vs. First Horizon National | FVCBankcorp vs. Western Alliance Bancorporation |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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