Correlation Between Enterprise Financial and Northeast Bancorp
Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and Northeast Bancorp 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 Financial and Northeast Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Financial Services and Northeast Bancorp, you can compare the effects of market volatilities on Enterprise Financial and Northeast Bancorp 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 Financial with a short position of Northeast Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and Northeast Bancorp.
Diversification Opportunities for Enterprise Financial and Northeast Bancorp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enterprise and Northeast is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Northeast Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Bancorp and Enterprise Financial 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 Financial Services are associated (or correlated) with Northeast Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Bancorp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Northeast Bancorp go up and down completely randomly.
Pair Corralation between Enterprise Financial and Northeast Bancorp
Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.38 times less return on investment than Northeast Bancorp. In addition to that, Enterprise Financial is 1.02 times more volatile than Northeast Bancorp. It trades about 0.11 of its total potential returns per unit of risk. Northeast Bancorp is currently generating about 0.15 per unit of volatility. If you would invest 5,360 in Northeast Bancorp on August 29, 2024 and sell it today you would earn a total of 4,600 from holding Northeast Bancorp or generate 85.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Financial Services vs. Northeast Bancorp
Performance |
| Timeline |
| Enterprise Financial |
| Northeast Bancorp |
Enterprise Financial and Northeast Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Financial and Northeast Bancorp
The main advantage of trading using opposite Enterprise Financial and Northeast Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Financial position performs unexpectedly, Northeast Bancorp 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 Northeast Bancorp will offset losses from the drop in Northeast Bancorp's long position.| Enterprise Financial vs. Home Federal Bancorp | Enterprise Financial vs. First Financial Northwest | Enterprise Financial vs. First Northwest Bancorp | Enterprise Financial vs. First Capital |
| Northeast Bancorp vs. Home Federal Bancorp | Northeast Bancorp vs. Mainstreet Bank | Northeast Bancorp vs. Investar Holding Corp | Northeast Bancorp vs. Magyar 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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