Correlation Between ESSA Bancorp and Axos Financial
Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Axos 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 ESSA Bancorp and Axos Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Axos Financial, you can compare the effects of market volatilities on ESSA Bancorp and Axos 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 ESSA Bancorp with a short position of Axos Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Axos Financial.
Diversification Opportunities for ESSA Bancorp and Axos Financial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Axos is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and ESSA 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 ESSA Bancorp are associated (or correlated) with Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Axos Financial go up and down completely randomly.
Pair Corralation between ESSA Bancorp and Axos Financial
Given the investment horizon of 90 days ESSA Bancorp is expected to generate 2.04 times less return on investment than Axos Financial. But when comparing it to its historical volatility, ESSA Bancorp is 1.46 times less risky than Axos Financial. It trades about 0.02 of its potential returns per unit of risk. Axos Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,865 in Axos Financial on January 20, 2024 and sell it today you would earn a total of 1,056 from holding Axos Financial or generate 27.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Bancorp vs. Axos Financial
Performance |
| Timeline |
| ESSA Bancorp |
| Axos Financial |
ESSA Bancorp and Axos Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Bancorp and Axos Financial
The main advantage of trading using opposite ESSA Bancorp and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, Axos 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 Axos Financial will offset losses from the drop in Axos Financial's long position.| ESSA Bancorp vs. Home Federal Bancorp | ESSA Bancorp vs. Community West Bancshares | ESSA Bancorp vs. First Financial Northwest | ESSA Bancorp vs. First Northwest Bancorp |
| Axos Financial vs. Home Federal Bancorp | Axos Financial vs. Community West Bancshares | Axos Financial vs. First Financial Northwest | Axos Financial vs. First Northwest 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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