Correlation Between ESSA Bancorp and First National

Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and First National 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 First National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESSA Bancorp and First National Corp, you can compare the effects of market volatilities on ESSA Bancorp and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and First National.

Diversification Opportunities for ESSA Bancorp and First National

0.72

Correlation Coefficient

ESSA Bancorp  First National

Poor diversification

The 3 months correlation between ESSA and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and First National go up and down completely randomly.

Pair Corralation between ESSA Bancorp and First National

Given the investment horizon of 90 days ESSA Bancorp is expected to generate 14.08 times less return on investment than First National. In addition to that, ESSA Bancorp is 1.25 times more volatile than First National Corp. It trades about 0.02 of its total potential returns per unit of risk. First National Corp is currently generating about 0.29 per unit of volatility. If you would invest  1,739  in First National Corp on September 29, 2024 and sell it today you would earn a total of  666.00  from holding First National Corp or generate 38.3% 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.  First National Corp

ESSA Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ESSA Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First National Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First National Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, First National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSA Bancorp and First National

The main advantage of trading using opposite ESSA Bancorp and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.

The idea behind ESSA Bancorp and First National Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.