Correlation Between Oak Valley and ESSA Bancorp

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

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

Diversification Opportunities for Oak Valley and ESSA Bancorp

0.24

Correlation Coefficient

Oak Valley  ESSA Bancorp

Modest diversification

The 3 months correlation between Oak and ESSA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp and Oak Valley 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 Oak Valley 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 Oak Valley i.e., Oak Valley and ESSA Bancorp go up and down completely randomly.

Pair Corralation between Oak Valley and ESSA Bancorp

Given the investment horizon of 90 days Oak Valley Bancorp is expected to under-perform the ESSA Bancorp. In addition to that, Oak Valley is 1.32 times more volatile than ESSA Bancorp. It trades about -0.11 of its total potential returns per unit of risk. ESSA Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  1,913  in ESSA Bancorp on December 28, 2024 and sell it today you would earn a total of  18.00  from holding ESSA Bancorp or generate 0.94% return on investment over 90 days.

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

Oak Valley Bancorp  vs.  ESSA Bancorp

Oak Valley Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oak Valley Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ESSA Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Oak Valley and ESSA Bancorp

The main advantage of trading using opposite Oak Valley and ESSA Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley 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 Oak Valley 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.