Correlation Between ESSA Bancorp and Washington Trust
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Washington Trust 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 Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Washington Trust Bancorp, you can compare the effects of market volatilities on ESSA Bancorp and Washington Trust 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 Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Washington Trust.
Diversification Opportunities for ESSA Bancorp and Washington Trust
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and Washington is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Washington Trust go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Washington Trust
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.14 times less return on investment than Washington Trust. But when comparing it to its historical volatility, ESSA Bancorp is 1.57 times less risky than Washington Trust. It trades about 0.12 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,511 in Washington Trust Bancorp on August 30, 2024 and sell it today you would earn a total of 221.00 from holding Washington Trust Bancorp or generate 6.29% 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. Washington Trust Bancorp
Performance |
| Timeline |
| ESSA Bancorp |
| Washington Trust Bancorp |
ESSA Bancorp and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Washington Trust
The main advantage of trading using opposite ESSA Bancorp and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust'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 |
| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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