Correlation Between Enterprise Bancorp and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and Arrow 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 Enterprise Bancorp and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Bancorp and Arrow Financial, you can compare the effects of market volatilities on Enterprise Bancorp and Arrow 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 Enterprise Bancorp with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and Arrow Financial.
Diversification Opportunities for Enterprise Bancorp and Arrow Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enterprise and Arrow is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Enterprise 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 Enterprise Bancorp are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Arrow Financial go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and Arrow Financial
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 0.96 times more return on investment than Arrow Financial. However, Enterprise Bancorp is 1.04 times less risky than Arrow Financial. It trades about 0.13 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.06 per unit of risk. If you would invest 3,022 in Enterprise Bancorp on August 23, 2024 and sell it today you would earn a total of 621.00 from holding Enterprise Bancorp or generate 20.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. Arrow Financial
Performance |
| Timeline |
| Enterprise Bancorp |
| Arrow Financial |
Enterprise Bancorp and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and Arrow Financial
The main advantage of trading using opposite Enterprise Bancorp and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, Arrow 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Enterprise Bancorp vs. Waterstone Financial | Enterprise Bancorp vs. Mid Penn Bancorp | Enterprise Bancorp vs. ST Bancorp | Enterprise Bancorp vs. Republic Bancorp |
| Arrow Financial vs. Waterstone Financial | Arrow Financial vs. Mid Penn Bancorp | Arrow Financial vs. ST Bancorp | Arrow Financial vs. Republic 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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