Correlation Between Enterprise Financial and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and Merchants 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 Merchants 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 Merchants Bancorp, you can compare the effects of market volatilities on Enterprise Financial and Merchants 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and Merchants Bancorp.
Diversification Opportunities for Enterprise Financial and Merchants Bancorp
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Enterprise and Merchants is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Enterprise Financial and Merchants Bancorp
Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 2.08 times more return on investment than Merchants Bancorp. However, Enterprise Financial is 2.08 times more volatile than Merchants Bancorp. It trades about -0.23 of its potential returns per unit of risk. Merchants Bancorp is currently generating about -0.51 per unit of risk. If you would invest 6,109 in Enterprise Financial Services on September 26, 2024 and sell it today you would lose (429.00) from holding Enterprise Financial Services or give up 7.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Enterprise Financial Services vs. Merchants Bancorp
Performance |
Timeline |
Enterprise Financial |
Merchants Bancorp |
Enterprise Financial and Merchants Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Enterprise Financial and Merchants Bancorp
The main advantage of trading using opposite Enterprise Financial and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Financial position performs unexpectedly, Merchants 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.Enterprise Financial vs. Home Federal Bancorp | Enterprise Financial vs. First Financial Northwest | Enterprise Financial vs. First Northwest Bancorp | Enterprise Financial vs. First Capital |
Check out your portfolio center.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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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