Correlation Between ESSA Bancorp and Luther Burbank

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

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

Diversification Opportunities for ESSA Bancorp and Luther Burbank

0.45

Correlation Coefficient

ESSA Bancorp  Luther Burbank

Very weak diversification

The 3 months correlation between ESSA and Luther is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Luther Burbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luther Burbank 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 Luther Burbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luther Burbank has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Luther Burbank go up and down completely randomly.

Pair Corralation between ESSA Bancorp and Luther Burbank

If you would invest  1,798  in ESSA Bancorp on September 2, 2024 and sell it today you would earn a total of  269.00  from holding ESSA Bancorp or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

ESSA Bancorp  vs.  Luther Burbank

ESSA Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, ESSA Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Luther Burbank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luther Burbank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Luther Burbank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ESSA Bancorp and Luther Burbank

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

The idea behind ESSA Bancorp and Luther Burbank 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.