Correlation Between Enterprise Financial and Finwise Bancorp

Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and Finwise Bancorp 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 Finwise Bancorp 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 Finwise Bancorp, you can compare the effects of market volatilities on Enterprise Financial and Finwise Bancorp 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 Finwise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and Finwise Bancorp.

Diversification Opportunities for Enterprise Financial and Finwise Bancorp

0.71

Correlation Coefficient

Enterprise Financial  Finwise Bancorp

Poor diversification

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

Pair Corralation between Enterprise Financial and Finwise Bancorp

Given the investment horizon of 90 days Enterprise Financial Services is expected to under-perform the Finwise Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Enterprise Financial Services is 1.71 times less risky than Finwise Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The Finwise Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,601  in Finwise Bancorp on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Finwise Bancorp or generate 8.93% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Finwise Bancorp

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.

Finwise Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Finwise Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Finwise Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Enterprise Financial and Finwise Bancorp

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

The idea behind Enterprise Financial Services and Finwise 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.