Correlation Between ESSA Bancorp and First Foundation

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

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

Diversification Opportunities for ESSA Bancorp and First Foundation

-0.17

Correlation Coefficient

ESSA Bancorp  First Foundation

Good diversification

The 3 months correlation between ESSA and First is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and First Foundation go up and down completely randomly.

Pair Corralation between ESSA Bancorp and First Foundation

Given the investment horizon of 90 days ESSA Bancorp is expected to generate 61.82 times more return on investment than First Foundation. However, ESSA Bancorp is 61.82 times more volatile than First Foundation. It trades about 0.13 of its potential returns per unit of risk. First Foundation is currently generating about -0.06 per unit of risk. If you would invest  1,882  in ESSA Bancorp on May 2, 2025 and sell it today you would earn a total of  61,618  from holding ESSA Bancorp or generate 3274.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ESSA Bancorp  vs.  First Foundation

ESSA Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, ESSA Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

First Foundation

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Foundation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ESSA Bancorp and First Foundation

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

The idea behind ESSA Bancorp and First Foundation 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.