Correlation Between ESSA Bancorp and Riverview Bancorp
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Riverview 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 Riverview 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 Riverview Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and Riverview 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 Riverview Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Riverview Bancorp.
Diversification Opportunities for ESSA Bancorp and Riverview Bancorp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Riverview is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Riverview Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverview 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 Riverview Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverview Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Riverview Bancorp go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Riverview Bancorp
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.15 times more return on investment than Riverview Bancorp. However, ESSA Bancorp is 1.15 times more volatile than Riverview Bancorp. It trades about 0.04 of its potential returns per unit of risk. Riverview Bancorp is currently generating about -0.01 per unit of risk. If you would invest 1,697 in ESSA Bancorp on September 2, 2024 and sell it today you would earn a total of 370.00 from holding ESSA Bancorp or generate 21.8% 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. Riverview Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| Riverview Bancorp |
ESSA Bancorp and Riverview Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Riverview Bancorp
The main advantage of trading using opposite ESSA Bancorp and Riverview Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Riverview 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 Riverview Bancorp will offset losses from the drop in Riverview 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 |
| Riverview Bancorp vs. Community West Bancshares | Riverview Bancorp vs. First Northwest Bancorp | Riverview Bancorp vs. Investar Holding Corp | Riverview Bancorp vs. Finward 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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