Correlation Between Five Star and Esquire Financial
Can any of the company-specific risk be diversified away by investing in both Five Star and Esquire 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 Five Star and Esquire Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and Esquire Financial Holdings, you can compare the effects of market volatilities on Five Star and Esquire 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 Five Star with a short position of Esquire Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and Esquire Financial.
Diversification Opportunities for Five Star and Esquire Financial
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Five and Esquire is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and Esquire Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esquire Financial and Five Star 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 Five Star Bancorp are associated (or correlated) with Esquire Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esquire Financial has no effect on the direction of Five Star i.e., Five Star and Esquire Financial go up and down completely randomly.
Pair Corralation between Five Star and Esquire Financial
Given the investment horizon of 90 days Five Star is expected to generate 1.49 times less return on investment than Esquire Financial. In addition to that, Five Star is 1.15 times more volatile than Esquire Financial Holdings. It trades about 0.17 of its total potential returns per unit of risk. Esquire Financial Holdings is currently generating about 0.28 per unit of volatility. If you would invest 6,662 in Esquire Financial Holdings on August 29, 2024 and sell it today you would earn a total of 1,062 from holding Esquire Financial Holdings or generate 15.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. Esquire Financial Holdings
Performance |
| Timeline |
| Five Star Bancorp |
| Esquire Financial |
Five Star and Esquire Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and Esquire Financial
The main advantage of trading using opposite Five Star and Esquire Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, Esquire 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 Esquire Financial will offset losses from the drop in Esquire Financial's long position.| Five Star vs. Fifth Third Bancorp | Five Star vs. Huntington Bancshares Incorporated | Five Star vs. MT Bank |
| Esquire Financial vs. Fifth Third Bancorp | Esquire Financial vs. Huntington Bancshares Incorporated | Esquire Financial vs. MT Bank |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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