Correlation Between Rhinebeck Bancorp and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both Rhinebeck Bancorp 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 Rhinebeck Bancorp and ESSA Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rhinebeck Bancorp and ESSA Bancorp, you can compare the effects of market volatilities on Rhinebeck Bancorp 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 Rhinebeck Bancorp with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rhinebeck Bancorp and ESSA Bancorp.
Diversification Opportunities for Rhinebeck Bancorp and ESSA Bancorp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rhinebeck and ESSA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rhinebeck Bancorp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Rhinebeck 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 Rhinebeck 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 Rhinebeck Bancorp i.e., Rhinebeck Bancorp and ESSA Bancorp go up and down completely randomly.
Pair Corralation between Rhinebeck Bancorp and ESSA Bancorp
Given the investment horizon of 90 days Rhinebeck Bancorp is expected to generate 1.16 times less return on investment than ESSA Bancorp. But when comparing it to its historical volatility, Rhinebeck Bancorp is 2.58 times less risky than ESSA Bancorp. It trades about 0.44 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rhinebeck Bancorp vs. ESSA Bancorp
Performance |
| Timeline |
| Rhinebeck Bancorp |
| ESSA Bancorp |
Rhinebeck Bancorp and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rhinebeck Bancorp and ESSA Bancorp
The main advantage of trading using opposite Rhinebeck Bancorp and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rhinebeck Bancorp 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.| Rhinebeck Bancorp vs. Home Federal Bancorp | Rhinebeck Bancorp vs. Community West Bancshares | Rhinebeck Bancorp vs. Magyar Bancorp | Rhinebeck Bancorp vs. First Financial Northwest |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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