Correlation Between ESSA Bancorp and Ponce Financial

Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp and Ponce 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 Ponce 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 Ponce Financial Group, you can compare the effects of market volatilities on ESSA Bancorp and Ponce 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 Ponce Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Ponce Financial.

Diversification Opportunities for ESSA Bancorp and Ponce Financial

0.1

Correlation Coefficient

ESSA Bancorp  Ponce Financial

Average diversification

The 3 months correlation between ESSA and Ponce is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp and Ponce Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ponce Financial Group 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 Ponce Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ponce Financial Group has no effect on the direction of ESSA Bancorp i.e., ESSA Bancorp and Ponce Financial go up and down completely randomly.

Pair Corralation between ESSA Bancorp and Ponce Financial

Given the investment horizon of 90 days ESSA Bancorp is expected to generate 165.95 times more return on investment than Ponce Financial. However, ESSA Bancorp is 165.95 times more volatile than Ponce Financial Group. It trades about 0.23 of its potential returns per unit of risk. Ponce Financial Group is currently generating about 0.05 per unit of risk. If you would invest  61,485  in ESSA Bancorp on May 5, 2025 and sell it today you would earn a total of  2,015  from holding ESSA Bancorp or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ESSA Bancorp  vs.  Ponce Financial Group

ESSA Bancorp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 17 (%) 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.

Ponce Financial Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ponce Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Ponce Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ESSA Bancorp and Ponce Financial

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

The idea behind ESSA Bancorp and Ponce Financial Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.