Correlation Between Enterprise Bancorp and Mid Southern

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

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

Diversification Opportunities for Enterprise Bancorp and Mid Southern

0.71

Correlation Coefficient

Enterprise Bancorp  Mid Southern

Poor diversification

The 3 months correlation between Enterprise and Mid is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Mid Southern Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Southern Bancorp and Enterprise 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 Enterprise Bancorp are associated (or correlated) with Mid Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Southern Bancorp has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Mid Southern go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Mid Southern

If you would invest  3,643  in Enterprise Bancorp on September 22, 2024 and sell it today you would earn a total of  363.00  from holding Enterprise Bancorp or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Enterprise Bancorp  vs.  Mid Southern Bancorp

Enterprise Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Enterprise Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mid Southern Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Southern Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mid Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enterprise Bancorp and Mid Southern

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

The idea behind Enterprise Bancorp and Mid Southern 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.