Correlation Between Home Federal and Enterprise Financial
Can any of the company-specific risk be diversified away by investing in both Home Federal and Enterprise Financial 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 Home Federal and Enterprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and Enterprise Financial Services, you can compare the effects of market volatilities on Home Federal and Enterprise Financial 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 Home Federal with a short position of Enterprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Enterprise Financial.
Diversification Opportunities for Home Federal and Enterprise Financial
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Enterprise is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial and Home Federal 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 Home Federal Bancorp are associated (or correlated) with Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of Home Federal i.e., Home Federal and Enterprise Financial go up and down completely randomly.
Pair Corralation between Home Federal and Enterprise Financial
Given the investment horizon of 90 days Home Federal is expected to generate 4.36 times less return on investment than Enterprise Financial. In addition to that, Home Federal is 1.8 times more volatile than Enterprise Financial Services. It trades about 0.03 of its total potential returns per unit of risk. Enterprise Financial Services is currently generating about 0.22 per unit of volatility. If you would invest 5,546 in Enterprise Financial Services on November 3, 2024 and sell it today you would earn a total of 438.00 from holding Enterprise Financial Services or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Home Federal Bancorp vs. Enterprise Financial Services
Performance |
| Timeline |
| Home Federal Bancorp |
| Enterprise Financial |
Home Federal and Enterprise Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Enterprise Financial
The main advantage of trading using opposite Home Federal and Enterprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Enterprise Financial 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 Enterprise Financial will offset losses from the drop in Enterprise Financial's long position.The idea behind Home Federal Bancorp and Enterprise Financial Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Enterprise Financial vs. US Bancorp | Enterprise Financial vs. Truist Financial Corp | Enterprise Financial vs. Fifth Third Bancorp | Enterprise Financial vs. KeyCorp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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