Correlation Between Enterprise Bancorp and ESSA Bancorp
Can any of the company-specific risk be diversified away by investing in both Enterprise 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 Enterprise 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 Enterprise Bancorp and ESSA Bancorp, you can compare the effects of market volatilities on Enterprise 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 Enterprise Bancorp with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and ESSA Bancorp.
Diversification Opportunities for Enterprise Bancorp and ESSA Bancorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enterprise and ESSA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Enterprise 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 Enterprise 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 Enterprise Bancorp i.e., Enterprise Bancorp and ESSA Bancorp go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and ESSA Bancorp
Given the investment horizon of 90 days Enterprise Bancorp is expected to under-perform the ESSA Bancorp. In addition to that, Enterprise Bancorp is 1.04 times more volatile than ESSA Bancorp. It trades about -0.02 of its total potential returns per unit of risk. ESSA Bancorp is currently generating about 0.01 per unit of volatility. If you would invest 1,573 in ESSA Bancorp on January 25, 2024 and sell it today you would earn a total of 59.00 from holding ESSA Bancorp or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. ESSA Bancorp
Performance |
| Timeline |
| Enterprise Bancorp |
| ESSA Bancorp |
Enterprise Bancorp and ESSA Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and ESSA Bancorp
The main advantage of trading using opposite Enterprise Bancorp and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise 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.| Enterprise Bancorp vs. Cullman Bancorp | Enterprise Bancorp vs. HMN Financial | Enterprise Bancorp vs. Home Federal Bancorp | Enterprise Bancorp vs. First Northwest Bancorp |
| ESSA Bancorp vs. Community West Bancshares | ESSA Bancorp vs. HMN Financial | ESSA Bancorp vs. First Northwest Bancorp | ESSA Bancorp vs. Cullman 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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