Correlation Between Byline Bancorp and ESSA Bancorp

Can any of the company-specific risk be diversified away by investing in both Byline 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 Byline 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 Byline Bancorp and ESSA Bancorp, you can compare the effects of market volatilities on Byline 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 Byline Bancorp with a short position of ESSA Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Byline Bancorp and ESSA Bancorp.

Diversification Opportunities for Byline Bancorp and ESSA Bancorp

0.74

Correlation Coefficient

Byline Bancorp  ESSA Bancorp

Poor diversification

The 3 months correlation between Byline and ESSA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Byline 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 Byline 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 Byline Bancorp i.e., Byline Bancorp and ESSA Bancorp go up and down completely randomly.

Pair Corralation between Byline Bancorp and ESSA Bancorp

Allowing for the 90-day total investment horizon Byline Bancorp is expected to under-perform the ESSA Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Byline Bancorp is 1.08 times less risky than ESSA Bancorp. The stock trades about -0.08 of its potential returns per unit of risk. The ESSA Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,908  in ESSA Bancorp on December 27, 2024 and sell it today you would lose (12.00) from holding ESSA Bancorp or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Byline Bancorp  vs.  ESSA Bancorp

Byline Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Byline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ESSA Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESSA Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Byline Bancorp and ESSA Bancorp

The main advantage of trading using opposite Byline Bancorp and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Byline 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.

The idea behind Byline Bancorp and ESSA Bancorp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.