Correlation Between ESSA Bancorp and Webster Financial
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Webster Financial 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 Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Webster Financial, you can compare the effects of market volatilities on ESSA Bancorp and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Webster Financial.
Diversification Opportunities for ESSA Bancorp and Webster Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESSA and Webster is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Webster Financial go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Webster Financial
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.38 times less return on investment than Webster Financial. But when comparing it to its historical volatility, ESSA Bancorp is 1.78 times less risky than Webster Financial. It trades about 0.18 of its potential returns per unit of risk. Webster Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,072 in Webster Financial on September 2, 2024 and sell it today you would earn a total of 1,106 from holding Webster Financial or generate 21.81% 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. Webster Financial
Performance |
| Timeline |
| ESSA Bancorp |
| Webster Financial |
ESSA Bancorp and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Webster Financial
The main advantage of trading using opposite ESSA Bancorp and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial'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 |
| Webster Financial vs. Affinity Bancshares | Webster Financial vs. Auburn National Bancorporation | Webster Financial vs. First Community | Webster Financial vs. LINKBANCORP |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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