Correlation Between ESSA Bancorp and Northeast Bancorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Northeast 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 Northeast 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 Northeast Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and Northeast 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 Northeast Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Northeast Bancorp.
Diversification Opportunities for ESSA Bancorp and Northeast Bancorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and Northeast is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Northeast Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast 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 Northeast Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Northeast Bancorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Northeast Bancorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.79 times less return on investment than Northeast Bancorp. In addition to that, ESSA Bancorp is 1.18 times more volatile than Northeast Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Northeast Bancorp is currently generating about 0.17 per unit of volatility. If you would invest 5,298 in Northeast Bancorp on August 25, 2024 and sell it today you would earn a total of 4,842 from holding Northeast Bancorp or generate 91.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. Northeast Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| Northeast Bancorp |
ESSA Bancorp and Northeast Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Northeast Bancorp
The main advantage of trading using opposite ESSA Bancorp and Northeast Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Northeast 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 Northeast Bancorp will offset losses from the drop in Northeast Bancorp's long position.| ESSA Bancorp vs. Fifth Third Bancorp | ESSA Bancorp vs. Zions Bancorporation | ESSA Bancorp vs. Huntington Bancshares Incorporated | ESSA Bancorp vs. PNC Financial Services |
| Northeast Bancorp vs. Fifth Third Bancorp | Northeast Bancorp vs. Zions Bancorporation | Northeast Bancorp vs. Huntington Bancshares Incorporated | Northeast Bancorp vs. PNC Financial Services |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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