Correlation Between Comerica and Enterprise Bancorp

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

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

Diversification Opportunities for Comerica and Enterprise Bancorp

0.77

Correlation Coefficient

Comerica  Enterprise Bancorp

Poor diversification

The 3 months correlation between Comerica and Enterprise is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Comerica 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 Comerica 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 Comerica i.e., Comerica and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Comerica and Enterprise Bancorp

Considering the 90-day investment horizon Comerica is expected to under-perform the Enterprise Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Comerica is 3.15 times less risky than Enterprise Bancorp. The stock trades about -0.18 of its potential returns per unit of risk. The Enterprise Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,711  in Enterprise Bancorp on September 15, 2024 and sell it today you would earn a total of  564.00  from holding Enterprise Bancorp or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Comerica  vs.  Enterprise Bancorp

Comerica

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Enterprise Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comerica and Enterprise Bancorp

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

The idea behind Comerica and Enterprise Bancorp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.