Correlation Between Enterprise Financial and Amalgamated Bank

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

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

Diversification Opportunities for Enterprise Financial and Amalgamated Bank

0.62

Correlation Coefficient

Enterprise Financial  Amalgamated Bank

Poor diversification

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

Pair Corralation between Enterprise Financial and Amalgamated Bank

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 0.77 times more return on investment than Amalgamated Bank. However, Enterprise Financial Services is 1.3 times less risky than Amalgamated Bank. It trades about -0.01 of its potential returns per unit of risk. Amalgamated Bank is currently generating about -0.09 per unit of risk. If you would invest  5,608  in Enterprise Financial Services on December 29, 2024 and sell it today you would lose (76.00) from holding Enterprise Financial Services or give up 1.36% of portfolio value over 90 days.

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

Enterprise Financial Services  vs.  Amalgamated Bank

Enterprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enterprise Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enterprise Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Amalgamated Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amalgamated Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Enterprise Financial and Amalgamated Bank

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

The idea behind Enterprise Financial Services and Amalgamated Bank 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.