Correlation Between Esquire Financial and Five Star

Can any of the company-specific risk be diversified away by investing in both Esquire Financial and Five Star 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 Esquire Financial and Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Esquire Financial Holdings and Five Star Bancorp, you can compare the effects of market volatilities on Esquire Financial and Five Star 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 Esquire Financial with a short position of Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esquire Financial and Five Star.

Diversification Opportunities for Esquire Financial and Five Star

0.63

Correlation Coefficient

Esquire Financial  Five Star

Poor diversification

The 3 months correlation between Esquire and Five is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Esquire Financial Holdings and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp and Esquire Financial 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 Esquire Financial Holdings are associated (or correlated) with Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of Esquire Financial i.e., Esquire Financial and Five Star go up and down completely randomly.

Pair Corralation between Esquire Financial and Five Star

Considering the 90-day investment horizon Esquire Financial Holdings is expected to generate 1.49 times more return on investment than Five Star. However, Esquire Financial is 1.49 times more volatile than Five Star Bancorp. It trades about -0.02 of its potential returns per unit of risk. Five Star Bancorp is currently generating about -0.06 per unit of risk. If you would invest  7,862  in Esquire Financial Holdings on December 27, 2024 and sell it today you would lose (294.00) from holding Esquire Financial Holdings or give up 3.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Esquire Financial Holdings  vs.  Five Star Bancorp

Esquire Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esquire Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Esquire Financial is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Five Star Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Esquire Financial and Five Star

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

The idea behind Esquire Financial Holdings and Five Star 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.