Correlation Between Bank of America and Enterprise Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and Enterprise 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 Bank of America and Enterprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Enterprise Financial Services, you can compare the effects of market volatilities on Bank of America and Enterprise 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 Bank of America with a short position of Enterprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Enterprise Financial.
Diversification Opportunities for Bank of America and Enterprise Financial
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Enterprise is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial and Bank of America 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 Bank of America are associated (or correlated) with Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of Bank of America i.e., Bank of America and Enterprise Financial go up and down completely randomly.
Pair Corralation between Bank of America and Enterprise Financial
Considering the 90-day investment horizon Bank of America is expected to generate 0.87 times more return on investment than Enterprise Financial. However, Bank of America is 1.15 times less risky than Enterprise Financial. It trades about 0.05 of its potential returns per unit of risk. Enterprise Financial Services is currently generating about 0.04 per unit of risk. If you would invest 3,278 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,422 from holding Bank of America or generate 43.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Enterprise Financial Services
Performance |
| Timeline |
| Bank of America |
| Enterprise Financial |
Bank of America and Enterprise Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Enterprise Financial
The main advantage of trading using opposite Bank of America and Enterprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Enterprise 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 Enterprise Financial will offset losses from the drop in Enterprise Financial's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Enterprise Financial vs. Dime Community Bancshares | Enterprise Financial vs. Texas Capital Bancshares | Enterprise Financial vs. First Citizens BancShares | Enterprise Financial vs. CIT Group Preferred |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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