Correlation Between Enterprise Bancorp and Zions Bancorporation

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

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

Diversification Opportunities for Enterprise Bancorp and Zions Bancorporation

-0.62

Correlation Coefficient

Enterprise Bancorp  Zions Bancorporation

Excellent diversification

The 3 months correlation between Enterprise and Zions is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation 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 Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Zions Bancorporation

Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 4.6 times more return on investment than Zions Bancorporation. However, Enterprise Bancorp is 4.6 times more volatile than Zions Bancorporation National. It trades about 0.15 of its potential returns per unit of risk. Zions Bancorporation National is currently generating about -0.09 per unit of risk. If you would invest  3,217  in Enterprise Bancorp on September 23, 2024 and sell it today you would earn a total of  789.00  from holding Enterprise Bancorp or generate 24.53% return on investment over 90 days.

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

Enterprise Bancorp  vs.  Zions Bancorp. National

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.

Zions Bancorporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zions Bancorporation National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Zions Bancorporation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enterprise Bancorp and Zions Bancorporation

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

The idea behind Enterprise Bancorp and Zions Bancorporation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.