Correlation Between Enterprise Bancorp and Simmons First

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

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

Diversification Opportunities for Enterprise Bancorp and Simmons First

0.91

Correlation Coefficient

Enterprise Bancorp  Simmons First

Almost no diversification

The 3 months correlation between Enterprise and Simmons is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Simmons First go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Simmons First

Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.34 times more return on investment than Simmons First. However, Enterprise Bancorp is 1.34 times more volatile than Simmons First National. It trades about 0.14 of its potential returns per unit of risk. Simmons First National is currently generating about 0.16 per unit of risk. If you would invest  2,961  in Enterprise Bancorp on September 5, 2024 and sell it today you would earn a total of  652.00  from holding Enterprise Bancorp or generate 22.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Enterprise Bancorp  vs.  Simmons First National

Enterprise Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 11 (%) 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.

Simmons First National

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simmons First National are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Simmons First exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Bancorp and Simmons First

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

The idea behind Enterprise Bancorp and Simmons First National 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.