Correlation Between Home Federal and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both Home Federal 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 Home Federal and ESSA Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and ESSA Bancorp, you can compare the effects of market volatilities on Home Federal 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 Home Federal with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and ESSA Bancorp.
Diversification Opportunities for Home Federal and ESSA Bancorp
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and ESSA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and ESSA Bancorp go up and down completely randomly.
Pair Corralation between Home Federal and ESSA Bancorp
Given the investment horizon of 90 days Home Federal is expected to generate 4.4 times less return on investment than ESSA Bancorp. But when comparing it to its historical volatility, Home Federal Bancorp is 1.01 times less risky than ESSA Bancorp. It trades about 0.05 of its potential returns per unit of risk. ESSA Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,882 in ESSA Bancorp on September 1, 2024 and sell it today you would earn a total of 185.00 from holding ESSA Bancorp or generate 9.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Home Federal Bancorp vs. ESSA Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| ESSA Bancorp |
Home Federal and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and ESSA Bancorp
The main advantage of trading using opposite Home Federal and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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.| Home Federal vs. Affinity Bancshares | Home Federal vs. Southern California Bancorp | Home Federal vs. Auburn National Bancorporation | Home Federal vs. BayCom Corp |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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