Correlation Between First Capital and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both First Capital and ESSA Bancorp 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 First Capital and ESSA Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and ESSA Bancorp, you can compare the effects of market volatilities on First Capital and ESSA Bancorp 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 First Capital with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and ESSA Bancorp.
Diversification Opportunities for First Capital and ESSA Bancorp
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and ESSA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and First Capital 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 First Capital are associated (or correlated) with ESSA Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Bancorp has no effect on the direction of First Capital i.e., First Capital and ESSA Bancorp go up and down completely randomly.
Pair Corralation between First Capital and ESSA Bancorp
Given the investment horizon of 90 days First Capital is expected to generate 1.27 times more return on investment than ESSA Bancorp. However, First Capital is 1.27 times more volatile than ESSA Bancorp. It trades about 0.3 of its potential returns per unit of risk. ESSA Bancorp is currently generating about 0.0 per unit of risk. If you would invest 3,225 in First Capital on November 28, 2024 and sell it today you would earn a total of 332.00 from holding First Capital or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. ESSA Bancorp
Performance |
| Timeline |
| First Capital |
| ESSA Bancorp |
First Capital and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and ESSA Bancorp
The main advantage of trading using opposite First Capital and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, ESSA Bancorp 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 ESSA Bancorp will offset losses from the drop in ESSA Bancorp's long position.| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
| ESSA Bancorp vs. Community West Bancshares | ESSA Bancorp vs. First Northwest Bancorp | ESSA Bancorp vs. First Community | ESSA Bancorp vs. Oak Valley 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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