Correlation Between Affinity Bancshares and Enterprise Financial

Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares 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 Affinity Bancshares and Enterprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affinity Bancshares and Enterprise Financial Services, you can compare the effects of market volatilities on Affinity Bancshares 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 Affinity Bancshares with a short position of Enterprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and Enterprise Financial.

Diversification Opportunities for Affinity Bancshares and Enterprise Financial

0.42

Correlation Coefficient

Affinity Bancshares  Enterprise Financial

Very weak diversification

The 3 months correlation between Affinity and Enterprise is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Affinity 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 Affinity Bancshares 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 Affinity 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 Affinity Bancshares i.e., Affinity Bancshares and Enterprise Financial go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Enterprise Financial

Given the investment horizon of 90 days Affinity Bancshares is expected to under-perform the Enterprise Financial. In addition to that, Affinity Bancshares is 2.93 times more volatile than Enterprise Financial Services. It trades about -0.05 of its total potential returns per unit of risk. Enterprise Financial Services is currently generating about -0.07 per unit of volatility. If you would invest  1,966  in Enterprise Financial Services on December 24, 2024 and sell it today you would lose (82.00) from holding Enterprise Financial Services or give up 4.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Affinity Bancshares  vs.  Enterprise Financial Services

Affinity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Enterprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enterprise Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Enterprise Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Affinity Bancshares and Enterprise Financial

The main advantage of trading using opposite Affinity Bancshares and Enterprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity Bancshares 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 Affinity Bancshares 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.