Correlation Between Community Bancorp and ENB Financial

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

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

Diversification Opportunities for Community Bancorp and ENB Financial

-0.08

Correlation Coefficient

Community Bancorp  ENB Financial

Good diversification

The 3 months correlation between Community and ENB is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Community Bancorp and ENB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENB Financial Corp and Community Bancorp 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 Community Bancorp are associated (or correlated) with ENB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENB Financial Corp has no effect on the direction of Community Bancorp i.e., Community Bancorp and ENB Financial go up and down completely randomly.

Pair Corralation between Community Bancorp and ENB Financial

Given the investment horizon of 90 days Community Bancorp is expected to generate 0.67 times more return on investment than ENB Financial. However, Community Bancorp is 1.5 times less risky than ENB Financial. It trades about 0.05 of its potential returns per unit of risk. ENB Financial Corp is currently generating about -0.08 per unit of risk. If you would invest  1,675  in Community Bancorp on October 12, 2024 and sell it today you would earn a total of  15.00  from holding Community Bancorp or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Community Bancorp  vs.  ENB Financial Corp

Community Bancorp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Community Bancorp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ENB Financial Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENB Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, ENB Financial is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Community Bancorp and ENB Financial

The main advantage of trading using opposite Community Bancorp and ENB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Bancorp position performs unexpectedly, ENB 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 ENB Financial will offset losses from the drop in ENB Financial's long position.

The idea behind Community Bancorp and ENB Financial Corp 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.

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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.