Correlation Between Enterprise Financial and Hawthorn Bancshares

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

Diversification Opportunities for Enterprise Financial and Hawthorn Bancshares

0.85

Correlation Coefficient

Enterprise Financial  Hawthorn Bancshares

Very poor diversification

The 3 months correlation between Enterprise and Hawthorn is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Hawthorn Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawthorn Bancshares 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 Hawthorn Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawthorn Bancshares has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Hawthorn Bancshares go up and down completely randomly.

Pair Corralation between Enterprise Financial and Hawthorn Bancshares

Given the investment horizon of 90 days Enterprise Financial is expected to generate 2.04 times less return on investment than Hawthorn Bancshares. But when comparing it to its historical volatility, Enterprise Financial Services is 1.16 times less risky than Hawthorn Bancshares. It trades about 0.1 of its potential returns per unit of risk. Hawthorn Bancshares is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,217  in Hawthorn Bancshares on October 8, 2024 and sell it today you would earn a total of  729.00  from holding Hawthorn Bancshares or generate 32.88% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Hawthorn Bancshares

Enterprise Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hawthorn Bancshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hawthorn Bancshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Hawthorn Bancshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and Hawthorn Bancshares

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

The idea behind Enterprise Financial Services and Hawthorn Bancshares 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.