Correlation Between Enterprise Bancorp and First Guaranty
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and First Guaranty 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 Guaranty 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 Guaranty Bancshares, you can compare the effects of market volatilities on Enterprise Bancorp and First Guaranty 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 Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and First Guaranty.
Diversification Opportunities for Enterprise Bancorp and First Guaranty
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enterprise and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares 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 Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and First Guaranty go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and First Guaranty
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.83 times less return on investment than First Guaranty. In addition to that, Enterprise Bancorp is 1.54 times more volatile than First Guaranty Bancshares. It trades about 0.22 of its total potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.61 per unit of volatility. If you would invest 1,075 in First Guaranty Bancshares on September 1, 2024 and sell it today you would earn a total of 356.00 from holding First Guaranty Bancshares or generate 33.12% 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 Guaranty Bancshares
Performance |
| Timeline |
| Enterprise Bancorp |
| First Guaranty Bancshares |
Enterprise Bancorp and First Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and First Guaranty
The main advantage of trading using opposite Enterprise Bancorp and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, First Guaranty 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 Guaranty will offset losses from the drop in First Guaranty'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 Guaranty vs. Community West Bancshares | First Guaranty vs. First Northwest Bancorp | First Guaranty vs. First Financial Northwest | First Guaranty vs. Great Southern 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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