Correlation Between ESSA Bancorp and United Community
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and United Community 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 United Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and United Community Banks,, you can compare the effects of market volatilities on ESSA Bancorp and United Community 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 United Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and United Community.
Diversification Opportunities for ESSA Bancorp and United Community
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and United is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and United Community Banks, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Community Banks, 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 United Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Community Banks, has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and United Community go up and down completely randomly.
Pair Corralation between ESSA Bancorp and United Community
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.85 times less return on investment than United Community. But when comparing it to its historical volatility, ESSA Bancorp is 1.44 times less risky than United Community. It trades about 0.2 of its potential returns per unit of risk. United Community Banks, is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,846 in United Community Banks, on September 1, 2024 and sell it today you would earn a total of 535.00 from holding United Community Banks, or generate 18.8% 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. United Community Banks,
Performance |
| Timeline |
| ESSA Bancorp |
| United Community Banks, |
ESSA Bancorp and United Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and United Community
The main advantage of trading using opposite ESSA Bancorp and United Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, United Community 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 United Community will offset losses from the drop in United Community'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 |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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