Correlation Between Enterprise Bancorp and First Financial
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and First 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 First 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 First Financial Northwest, you can compare the effects of market volatilities on Enterprise Bancorp and First 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and First Financial.
Diversification Opportunities for Enterprise Bancorp and First Financial
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Enterprise and First is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and First Financial go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and First Financial
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 2.02 times more return on investment than First Financial. However, Enterprise Bancorp is 2.02 times more volatile than First Financial Northwest. It trades about 0.39 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.16 per unit of risk. If you would invest 3,831 in Enterprise Bancorp on November 9, 2024 and sell it today you would earn a total of 606.00 from holding Enterprise Bancorp or generate 15.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. First Financial Northwest
Performance |
| Timeline |
| Enterprise Bancorp |
| First Financial Northwest |
Enterprise Bancorp and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and First Financial
The main advantage of trading using opposite Enterprise Bancorp and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial'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 |
| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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