Correlation Between Enterprise Bancorp and BankFinancial
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and BankFinancial 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 BankFinancial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Bancorp and BankFinancial, you can compare the effects of market volatilities on Enterprise Bancorp and BankFinancial 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 BankFinancial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and BankFinancial.
Diversification Opportunities for Enterprise Bancorp and BankFinancial
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enterprise and BankFinancial is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial 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 BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and BankFinancial go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and BankFinancial
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.89 times less return on investment than BankFinancial. In addition to that, Enterprise Bancorp is 1.4 times more volatile than BankFinancial. It trades about 0.04 of its total potential returns per unit of risk. BankFinancial is currently generating about 0.11 per unit of volatility. If you would invest 763.00 in BankFinancial on September 1, 2024 and sell it today you would earn a total of 575.00 from holding BankFinancial or generate 75.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. BankFinancial
Performance |
| Timeline |
| Enterprise Bancorp |
| BankFinancial |
Enterprise Bancorp and BankFinancial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and BankFinancial
The main advantage of trading using opposite Enterprise Bancorp and BankFinancial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, BankFinancial 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 BankFinancial will offset losses from the drop in BankFinancial's long position.| Enterprise Bancorp vs. Home Federal Bancorp | Enterprise Bancorp vs. First Northwest Bancorp | Enterprise Bancorp vs. Community West Bancshares | Enterprise Bancorp vs. First Financial Northwest |
| BankFinancial vs. First Business Financial | BankFinancial vs. Old Point Financial | BankFinancial vs. Parke Bancorp | BankFinancial vs. Community West Bancshares |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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