Correlation Between Enterprise Financial and 1st Source
Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and 1st Source 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 1st Source 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 1st Source, you can compare the effects of market volatilities on Enterprise Financial and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and 1st Source.
Diversification Opportunities for Enterprise Financial and 1st Source
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Enterprise and 1st is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and 1st Source go up and down completely randomly.
Pair Corralation between Enterprise Financial and 1st Source
Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.62 times less return on investment than 1st Source. In addition to that, Enterprise Financial is 1.11 times more volatile than 1st Source. It trades about 0.03 of its total potential returns per unit of risk. 1st Source is currently generating about 0.05 per unit of volatility. If you would invest 4,737 in 1st Source on September 1, 2024 and sell it today you would earn a total of 1,752 from holding 1st Source or generate 36.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Financial Services vs. 1st Source
Performance |
| Timeline |
| Enterprise Financial |
| 1st Source |
Enterprise Financial and 1st Source Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Financial and 1st Source
The main advantage of trading using opposite Enterprise Financial and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Financial position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source'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 |
| 1st Source vs. Penns Woods Bancorp | 1st Source vs. Great Southern Bancorp | 1st Source vs. Waterstone Financial | 1st Source vs. Chemung Financial Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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