Correlation Between ESSA Bancorp and Zions Bancorporation
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Zions Bancorporation 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 Zions Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Zions Bancorporation, you can compare the effects of market volatilities on ESSA Bancorp and Zions Bancorporation 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 Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Zions Bancorporation.
Diversification Opportunities for ESSA Bancorp and Zions Bancorporation
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Zions is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation 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 Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Zions Bancorporation go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Zions Bancorporation
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 3.95 times less return on investment than Zions Bancorporation. But when comparing it to its historical volatility, ESSA Bancorp is 1.47 times less risky than Zions Bancorporation. It trades about 0.01 of its potential returns per unit of risk. Zions Bancorporation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,331 in Zions Bancorporation on August 27, 2024 and sell it today you would earn a total of 1,727 from holding Zions Bancorporation or generate 39.88% 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. Zions Bancorp.
Performance |
| Timeline |
| ESSA Bancorp |
| Zions Bancorporation |
ESSA Bancorp and Zions Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Zions Bancorporation
The main advantage of trading using opposite ESSA Bancorp and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Zions Bancorporation 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 Zions Bancorporation will offset losses from the drop in Zions Bancorporation's long position.| ESSA Bancorp vs. Fifth Third Bancorp | ESSA Bancorp vs. Zions Bancorporation | ESSA Bancorp vs. Huntington Bancshares Incorporated | ESSA Bancorp vs. PNC Financial Services |
| Zions Bancorporation vs. KeyCorp | Zions Bancorporation vs. Comerica | Zions Bancorporation vs. First Horizon National | Zions Bancorporation vs. Western Alliance Bancorporation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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