Correlation Between Enterprise Financial and Richmond Mutual

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

Diversification Opportunities for Enterprise Financial and Richmond Mutual

0.76

Correlation Coefficient

Enterprise Financial  Richmond Mutual

Poor diversification

The 3 months correlation between Enterprise and Richmond is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Richmond Mutual Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richmond Mutual Banc 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 Richmond Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richmond Mutual Banc has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Richmond Mutual go up and down completely randomly.

Pair Corralation between Enterprise Financial and Richmond Mutual

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 2.33 times more return on investment than Richmond Mutual. However, Enterprise Financial is 2.33 times more volatile than Richmond Mutual Bancorporation. It trades about 0.13 of its potential returns per unit of risk. Richmond Mutual Bancorporation is currently generating about 0.25 per unit of risk. If you would invest  4,993  in Enterprise Financial Services on September 12, 2024 and sell it today you would earn a total of  976.00  from holding Enterprise Financial Services or generate 19.55% 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.  Richmond Mutual Bancorp.

Enterprise Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Enterprise Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Richmond Mutual Banc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Mutual Bancorporation are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Richmond Mutual demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and Richmond Mutual

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

The idea behind Enterprise Financial Services and Richmond Mutual Bancorporation 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.