Correlation Between ENB Financial and Traditions Bank
Can any of the company-specific risk be diversified away by investing in both ENB Financial and Traditions Bank 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 ENB Financial and Traditions Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENB Financial Corp and Traditions Bank, you can compare the effects of market volatilities on ENB Financial and Traditions Bank 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 ENB Financial with a short position of Traditions Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENB Financial and Traditions Bank.
Diversification Opportunities for ENB Financial and Traditions Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENB and Traditions is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ENB Financial Corp and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions Bank and ENB 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 ENB Financial Corp are associated (or correlated) with Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of ENB Financial i.e., ENB Financial and Traditions Bank go up and down completely randomly.
Pair Corralation between ENB Financial and Traditions Bank
Given the investment horizon of 90 days ENB Financial is expected to generate 1.52 times less return on investment than Traditions Bank. In addition to that, ENB Financial is 1.46 times more volatile than Traditions Bank. It trades about 0.02 of its total potential returns per unit of risk. Traditions Bank is currently generating about 0.05 per unit of volatility. If you would invest 3,128 in Traditions Bank on September 12, 2024 and sell it today you would earn a total of 72.00 from holding Traditions Bank or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ENB Financial Corp vs. Traditions Bank
Performance |
| Timeline |
| ENB Financial Corp |
| Traditions Bank |
ENB Financial and Traditions Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENB Financial and Traditions Bank
The main advantage of trading using opposite ENB Financial and Traditions Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENB Financial position performs unexpectedly, Traditions Bank 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 Traditions Bank will offset losses from the drop in Traditions Bank's long position.| ENB Financial vs. Freedom Bank of | ENB Financial vs. HUMANA INC | ENB Financial vs. Barloworld Ltd ADR | ENB Financial vs. Morningstar Unconstrained Allocation |
| Traditions Bank vs. Franklin Financial Services | Traditions Bank vs. ENB Financial Corp | Traditions Bank vs. Community Heritage Financial | Traditions Bank vs. Potomac 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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