Correlation Between FB Financial and Esquire Financial
Can any of the company-specific risk be diversified away by investing in both FB Financial 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 FB Financial and Esquire Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FB Financial Corp and Esquire Financial Holdings, you can compare the effects of market volatilities on FB Financial 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 FB Financial with a short position of Esquire Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of FB Financial and Esquire Financial.
Diversification Opportunities for FB Financial and Esquire Financial
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FBK and Esquire is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding FB Financial Corp and Esquire Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esquire Financial and FB 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 FB Financial Corp 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 FB Financial i.e., FB Financial and Esquire Financial go up and down completely randomly.
Pair Corralation between FB Financial and Esquire Financial
Considering the 90-day investment horizon FB Financial Corp is expected to generate 1.21 times more return on investment than Esquire Financial. However, FB Financial is 1.21 times more volatile than Esquire Financial Holdings. It trades about 0.16 of its potential returns per unit of risk. Esquire Financial Holdings is currently generating about 0.0 per unit of risk. If you would invest 3,603 in FB Financial Corp on January 25, 2024 and sell it today you would earn a total of 263.00 from holding FB Financial Corp or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FB Financial Corp vs. Esquire Financial Holdings
Performance |
| Timeline |
| FB Financial Corp |
| Esquire Financial |
FB Financial and Esquire Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FB Financial and Esquire Financial
The main advantage of trading using opposite FB Financial and Esquire Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FB Financial 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 FB Financial Corp 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.| Esquire Financial vs. HMN Financial | Esquire Financial vs. Lake Shore Bancorp | Esquire Financial vs. Rhinebeck Bancorp |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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