Correlation Between Texas Capital and Enterprise Financial
Can any of the company-specific risk be diversified away by investing in both Texas Capital 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 Texas Capital and Enterprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Capital Bancshares and Enterprise Financial Services, you can compare the effects of market volatilities on Texas Capital 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 Texas Capital with a short position of Enterprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Enterprise Financial.
Diversification Opportunities for Texas Capital and Enterprise Financial
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Texas and Enterprise is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial and Texas Capital 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 Texas Capital Bancshares 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 Texas Capital i.e., Texas Capital and Enterprise Financial go up and down completely randomly.
Pair Corralation between Texas Capital and Enterprise Financial
Assuming the 90 days horizon Texas Capital Bancshares is expected to generate 1.28 times more return on investment than Enterprise Financial. However, Texas Capital is 1.28 times more volatile than Enterprise Financial Services. It trades about -0.05 of its potential returns per unit of risk. Enterprise Financial Services is currently generating about -0.07 per unit of risk. If you would invest 2,133 in Texas Capital Bancshares on October 26, 2024 and sell it today you would lose (83.00) from holding Texas Capital Bancshares or give up 3.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. Enterprise Financial Services
Performance |
| Timeline |
| Texas Capital Bancshares |
| Enterprise Financial |
Texas Capital and Enterprise Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Enterprise Financial
The main advantage of trading using opposite Texas Capital and Enterprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital 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.| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
| Enterprise Financial vs. Dime Community Bancshares | Enterprise Financial vs. Texas Capital Bancshares | Enterprise Financial vs. First Citizens BancShares | Enterprise Financial vs. CIT Group Preferred |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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