Correlation Between ESSA Bancorp and HMN Financial

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

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

Diversification Opportunities for ESSA Bancorp and HMN Financial

0.0

Correlation Coefficient

ESSA Bancorp  HMN Financial

Pay attention - limited upside

The 3 months correlation between ESSA and HMN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial 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 HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and HMN Financial go up and down completely randomly.

Pair Corralation between ESSA Bancorp and HMN Financial

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ESSA Bancorp  vs.  HMN Financial

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.

HMN Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HMN Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ESSA Bancorp and HMN Financial

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

The idea behind ESSA Bancorp and HMN Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.