Correlation Between ESSA Bancorp and Horizon Bancorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Horizon 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 Horizon 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 Horizon Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and Horizon 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 Horizon Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Horizon Bancorp.
Diversification Opportunities for ESSA Bancorp and Horizon Bancorp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Horizon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Horizon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon 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 Horizon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Horizon Bancorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Horizon Bancorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 3.26 times less return on investment than Horizon Bancorp. But when comparing it to its historical volatility, ESSA Bancorp is 1.18 times less risky than Horizon Bancorp. It trades about 0.01 of its potential returns per unit of risk. Horizon Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,387 in Horizon Bancorp on August 24, 2024 and sell it today you would earn a total of 465.00 from holding Horizon Bancorp or generate 33.53% 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. Horizon Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| Horizon Bancorp |
ESSA Bancorp and Horizon Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Horizon Bancorp
The main advantage of trading using opposite ESSA Bancorp and Horizon Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Horizon 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 Horizon Bancorp will offset losses from the drop in Horizon Bancorp'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 |
| Horizon Bancorp vs. Community West Bancshares | Horizon Bancorp vs. Heritage Financial | Horizon Bancorp vs. First Financial Northwest | Horizon Bancorp vs. Sierra 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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