Correlation Between Enterprise Financial and Simmons First

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

Diversification Opportunities for Enterprise Financial and Simmons First

0.69

Correlation Coefficient

Enterprise Financial  Simmons First

Poor diversification

The 3 months correlation between Enterprise and Simmons is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Simmons First go up and down completely randomly.

Pair Corralation between Enterprise Financial and Simmons First

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 1.1 times more return on investment than Simmons First. However, Enterprise Financial is 1.1 times more volatile than Simmons First National. It trades about -0.03 of its potential returns per unit of risk. Simmons First National is currently generating about -0.07 per unit of risk. If you would invest  5,608  in Enterprise Financial Services on December 30, 2024 and sell it today you would lose (222.00) from holding Enterprise Financial Services or give up 3.96% 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.  Simmons First National

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.

Simmons First National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simmons First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Enterprise Financial and Simmons First

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

The idea behind Enterprise Financial Services and Simmons First National 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.