Correlation Between ESSA Bancorp and NSTS Bancorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and NSTS 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 NSTS 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 NSTS Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and NSTS 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 NSTS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and NSTS Bancorp.
Diversification Opportunities for ESSA Bancorp and NSTS Bancorp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and NSTS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and NSTS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTS 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 NSTS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTS Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and NSTS Bancorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and NSTS Bancorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.9 times more return on investment than NSTS Bancorp. However, ESSA Bancorp is 2.9 times more volatile than NSTS Bancorp. It trades about 0.21 of its potential returns per unit of risk. NSTS Bancorp is currently generating about 0.07 per unit of risk. If you would invest 1,880 in ESSA Bancorp on September 3, 2024 and sell it today you would earn a total of 187.00 from holding ESSA Bancorp or generate 9.95% 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. NSTS Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| NSTS Bancorp |
ESSA Bancorp and NSTS Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and NSTS Bancorp
The main advantage of trading using opposite ESSA Bancorp and NSTS Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, NSTS 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 NSTS Bancorp will offset losses from the drop in NSTS 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 |
| NSTS Bancorp vs. JPMorgan Chase Co | NSTS Bancorp vs. Citigroup | NSTS Bancorp vs. Wells Fargo | NSTS Bancorp vs. Toronto Dominion Bank |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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