Correlation Between ESSA Bancorp and South Plains
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and South Plains 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 South Plains into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and South Plains Financial, you can compare the effects of market volatilities on ESSA Bancorp and South Plains 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 South Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and South Plains.
Diversification Opportunities for ESSA Bancorp and South Plains
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ESSA and South is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and South Plains Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Plains 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 South Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Plains Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and South Plains go up and down completely randomly.
Pair Corralation between ESSA Bancorp and South Plains
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 0.74 times more return on investment than South Plains. However, ESSA Bancorp is 1.36 times less risky than South Plains. It trades about 0.31 of its potential returns per unit of risk. South Plains Financial is currently generating about 0.14 per unit of risk. If you would invest 1,914 in ESSA Bancorp on November 3, 2024 and sell it today you would earn a total of 177.00 from holding ESSA Bancorp or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. South Plains Financial
Performance |
| Timeline |
| ESSA Bancorp |
| South Plains Financial |
ESSA Bancorp and South Plains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and South Plains
The main advantage of trading using opposite ESSA Bancorp and South Plains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, South Plains 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 South Plains will offset losses from the drop in South Plains' 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 |
| South Plains vs. Sound Financial Bancorp | South Plains vs. Finward Bancorp | South Plains vs. Franklin Financial Services | South Plains vs. Community West Bancshares |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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