Correlation Between National Bank and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and ESSA Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and ESSA Bancorp, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and ESSA Bancorp.
Diversification Opportunities for National Bank and ESSA Bancorp
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and ESSA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and ESSA Bancorp go up and down completely randomly.
Pair Corralation between National Bank and ESSA Bancorp
Given the investment horizon of 90 days National Bank Holdings is expected to generate 0.86 times more return on investment than ESSA Bancorp. However, National Bank Holdings is 1.17 times less risky than ESSA Bancorp. It trades about 0.07 of its potential returns per unit of risk. ESSA Bancorp is currently generating about 0.05 per unit of risk. If you would invest 3,115 in National Bank Holdings on September 2, 2024 and sell it today you would earn a total of 1,659 from holding National Bank Holdings or generate 53.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. ESSA Bancorp
Performance |
| Timeline |
| National Bank Holdings |
| ESSA Bancorp |
National Bank and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and ESSA Bancorp
The main advantage of trading using opposite National Bank and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest Bancorp |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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