Correlation Between PSB Holdings and Enterprise Bancorp
Can any of the company-specific risk be diversified away by investing in both PSB Holdings and Enterprise 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 PSB Holdings and Enterprise Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PSB Holdings and Enterprise Bancorp, you can compare the effects of market volatilities on PSB Holdings and Enterprise 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 PSB Holdings with a short position of Enterprise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSB Holdings and Enterprise Bancorp.
Diversification Opportunities for PSB Holdings and Enterprise Bancorp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PSB and Enterprise is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and PSB Holdings 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 PSB Holdings are associated (or correlated) with Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of PSB Holdings i.e., PSB Holdings and Enterprise Bancorp go up and down completely randomly.
Pair Corralation between PSB Holdings and Enterprise Bancorp
Given the investment horizon of 90 days PSB Holdings is expected to generate 1.97 times less return on investment than Enterprise Bancorp. But when comparing it to its historical volatility, PSB Holdings is 3.28 times less risky than Enterprise Bancorp. It trades about 0.36 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,190 in Enterprise Bancorp on September 1, 2024 and sell it today you would earn a total of 509.00 from holding Enterprise Bancorp or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PSB Holdings vs. Enterprise Bancorp
Performance |
| Timeline |
| PSB Holdings |
| Enterprise Bancorp |
PSB Holdings and Enterprise Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PSB Holdings and Enterprise Bancorp
The main advantage of trading using opposite PSB Holdings and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSB Holdings position performs unexpectedly, Enterprise 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 Enterprise Bancorp will offset losses from the drop in Enterprise Bancorp's long position.| PSB Holdings vs. Eagle Financial Services | PSB Holdings vs. National Capital Bank | PSB Holdings vs. Community Heritage Financial | PSB Holdings vs. Citizens Financial Corp |
| 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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