Correlation Between Esquire Financial and Southern States

Can any of the company-specific risk be diversified away by investing in both Esquire Financial and Southern States 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 Southern States 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 Southern States Bancshares, you can compare the effects of market volatilities on Esquire Financial and Southern States 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 Southern States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esquire Financial and Southern States.

Diversification Opportunities for Esquire Financial and Southern States

0.94

Correlation Coefficient

Esquire Financial  Southern States

Almost no diversification

The 3 months correlation between Esquire and Southern is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Esquire Financial Holdings and Southern States Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern States Banc 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 Southern States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern States Banc has no effect on the direction of Esquire Financial i.e., Esquire Financial and Southern States go up and down completely randomly.

Pair Corralation between Esquire Financial and Southern States

Considering the 90-day investment horizon Esquire Financial Holdings is expected to generate 0.8 times more return on investment than Southern States. However, Esquire Financial Holdings is 1.24 times less risky than Southern States. It trades about 0.21 of its potential returns per unit of risk. Southern States Bancshares is currently generating about 0.13 per unit of risk. If you would invest  4,657  in Esquire Financial Holdings on September 5, 2024 and sell it today you would earn a total of  3,135  from holding Esquire Financial Holdings or generate 67.32% return on investment over 90 days.

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

Esquire Financial Holdings  vs.  Southern States Bancshares

Esquire Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Esquire Financial Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Esquire Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Southern States Banc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southern States Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Southern States disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Esquire Financial and Southern States

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

The idea behind Esquire Financial Holdings and Southern States Bancshares 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.