Correlation Between Enterprise Bancorp and First Foundation
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and First Foundation 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 Foundation 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 Foundation, you can compare the effects of market volatilities on Enterprise Bancorp and First Foundation 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 Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and First Foundation.
Diversification Opportunities for Enterprise Bancorp and First Foundation
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enterprise and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and First Foundation go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and First Foundation
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 0.43 times more return on investment than First Foundation. However, Enterprise Bancorp is 2.3 times less risky than First Foundation. It trades about 0.02 of its potential returns per unit of risk. First Foundation is currently generating about 0.0 per unit of risk. If you would invest 3,365 in Enterprise Bancorp on September 3, 2024 and sell it today you would earn a total of 334.00 from holding Enterprise Bancorp or generate 9.93% 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. First Foundation
Performance |
| Timeline |
| Enterprise Bancorp |
| First Foundation |
Enterprise Bancorp and First Foundation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and First Foundation
The main advantage of trading using opposite Enterprise Bancorp and First Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, First Foundation 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 Foundation will offset losses from the drop in First Foundation's long position.| Enterprise Bancorp vs. JPMorgan Chase Co | Enterprise Bancorp vs. Citigroup | Enterprise Bancorp vs. Wells Fargo | Enterprise Bancorp vs. Toronto Dominion Bank |
| First Foundation vs. Veritex Holdings | First Foundation vs. ConnectOne Bancorp | First Foundation vs. The First Bancshares, | First Foundation vs. First Mid Illinois |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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