Correlation Between ESSA Bancorp and Independent Bank
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Independent Bank, you can compare the effects of market volatilities on ESSA Bancorp and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Independent Bank.
Diversification Opportunities for ESSA Bancorp and Independent Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Independent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Independent Bank go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Independent Bank
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.15 times less return on investment than Independent Bank. But when comparing it to its historical volatility, ESSA Bancorp is 1.53 times less risky than Independent Bank. It trades about 0.13 of its potential returns per unit of risk. Independent Bank is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,330 in Independent Bank on August 31, 2024 and sell it today you would earn a total of 464.00 from holding Independent Bank or generate 13.93% 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. Independent Bank
Performance |
| Timeline |
| ESSA Bancorp |
| Independent Bank |
ESSA Bancorp and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Independent Bank
The main advantage of trading using opposite ESSA Bancorp and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank'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 |
| Independent Bank vs. First Northwest Bancorp | Independent Bank vs. Community West Bancshares | Independent Bank vs. First Financial Northwest | Independent Bank vs. Great Southern 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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