Correlation Between Southern States and Esquire Financial

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

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

Diversification Opportunities for Southern States and Esquire Financial

0.94

Correlation Coefficient

Southern States  Esquire Financial

Almost no diversification

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

Pair Corralation between Southern States and Esquire Financial

Given the investment horizon of 90 days Southern States is expected to generate 1.35 times less return on investment than Esquire Financial. In addition to that, Southern States is 1.24 times more volatile than Esquire Financial Holdings. It trades about 0.13 of its total potential returns per unit of risk. Esquire Financial Holdings is currently generating about 0.21 per unit of volatility. 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

Southern States Bancshares  vs.  Esquire Financial Holdings

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.

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.

Pair Trading with Southern States and Esquire Financial

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

The idea behind Southern States Bancshares and Esquire Financial Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.