Correlation Between ESSA Bancorp and First Western
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and First Western 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 Western 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 Western Financial, you can compare the effects of market volatilities on ESSA Bancorp and First Western 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 Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and First Western.
Diversification Opportunities for ESSA Bancorp and First Western
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and First Western Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Western Financial 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 Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Western Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and First Western go up and down completely randomly.
Pair Corralation between ESSA Bancorp and First Western
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.52 times less return on investment than First Western. In addition to that, ESSA Bancorp is 1.62 times more volatile than First Western Financial. It trades about 0.12 of its total potential returns per unit of risk. First Western Financial is currently generating about 0.5 per unit of volatility. If you would invest 1,865 in First Western Financial on August 30, 2024 and sell it today you would earn a total of 331.00 from holding First Western Financial or generate 17.75% 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 Western Financial
Performance |
| Timeline |
| ESSA Bancorp |
| First Western Financial |
ESSA Bancorp and First Western Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and First Western
The main advantage of trading using opposite ESSA Bancorp and First Western positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, First Western 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 Western will offset losses from the drop in First Western'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 Western vs. Home Federal Bancorp | First Western vs. First Financial Northwest | First Western vs. First Northwest Bancorp | First Western vs. First Capital |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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