Correlation Between Enterprise Bancorp and Truist Financial

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

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

Diversification Opportunities for Enterprise Bancorp and Truist Financial

-0.8

Correlation Coefficient

Enterprise Bancorp  Truist Financial

Pay attention - limited upside

The 3 months correlation between Enterprise and Truist is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Truist Financial go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Truist Financial

Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.86 times more return on investment than Truist Financial. However, Enterprise Bancorp is 1.86 times more volatile than Truist Financial. It trades about 0.03 of its potential returns per unit of risk. Truist Financial is currently generating about 0.01 per unit of risk. If you would invest  3,391  in Enterprise Bancorp on October 3, 2024 and sell it today you would earn a total of  574.00  from holding Enterprise Bancorp or generate 16.93% return on investment over 90 days.

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

Enterprise Bancorp  vs.  Truist Financial

Enterprise Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 10 (%) 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.

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Preferred Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Enterprise Bancorp and Truist Financial

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

The idea behind Enterprise Bancorp and Truist Financial 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.