Correlation Between Enterprise Bancorp and Northwest Bancshares
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and Northwest Bancshares 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 Northwest Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Bancorp and Northwest Bancshares, you can compare the effects of market volatilities on Enterprise Bancorp and Northwest Bancshares 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 Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and Northwest Bancshares.
Diversification Opportunities for Enterprise Bancorp and Northwest Bancshares
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Enterprise and Northwest is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest 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 Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Northwest Bancshares go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and Northwest Bancshares
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.04 times more return on investment than Northwest Bancshares. However, Enterprise Bancorp is 1.04 times more volatile than Northwest Bancshares. It trades about 0.22 of its potential returns per unit of risk. Northwest Bancshares is currently generating about 0.17 per unit of risk. If you would invest 3,190 in Enterprise Bancorp on September 1, 2024 and sell it today you would earn a total of 509.00 from holding Enterprise Bancorp or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. Northwest Bancshares
Performance |
| Timeline |
| Enterprise Bancorp |
| Northwest Bancshares |
Enterprise Bancorp and Northwest Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and Northwest Bancshares
The main advantage of trading using opposite Enterprise Bancorp and Northwest Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, Northwest Bancshares 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 Northwest Bancshares will offset losses from the drop in Northwest Bancshares' 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 |
| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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