Correlation Between Enterprise Bancorp and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and Westamerica Bancorporation 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 Westamerica Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Bancorp and Westamerica Bancorporation, you can compare the effects of market volatilities on Enterprise Bancorp and Westamerica Bancorporation 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 Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and Westamerica Bancorporation.
Diversification Opportunities for Enterprise Bancorp and Westamerica Bancorporation
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enterprise and Westamerica is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between Enterprise Bancorp and Westamerica Bancorporation
Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.22 times more return on investment than Westamerica Bancorporation. However, Enterprise Bancorp is 1.22 times more volatile than Westamerica Bancorporation. It trades about 0.06 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.04 per unit of risk. If you would invest 2,760 in Enterprise Bancorp on August 27, 2024 and sell it today you would earn a total of 927.00 from holding Enterprise Bancorp or generate 33.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Bancorp vs. Westamerica Bancorp.
Performance |
| Timeline |
| Enterprise Bancorp |
| Westamerica Bancorporation |
Enterprise Bancorp and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Bancorp and Westamerica Bancorporation
The main advantage of trading using opposite Enterprise Bancorp and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation'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 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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