Correlation Between Enterprise Financial and First IC

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

Diversification Opportunities for Enterprise Financial and First IC

-0.36

Correlation Coefficient

Enterprise Financial  First IC

Very good diversification

The 3 months correlation between Enterprise and First is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 First IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and First IC go up and down completely randomly.

Pair Corralation between Enterprise Financial and First IC

Assuming the 90 days horizon Enterprise Financial Services is expected to under-perform the First IC. But the preferred stock apears to be less risky and, when comparing its historical volatility, Enterprise Financial Services is 6.47 times less risky than First IC. The preferred stock trades about -0.03 of its potential returns per unit of risk. The First IC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  930.00  in First IC on December 30, 2024 and sell it today you would earn a total of  795.00  from holding First IC or generate 85.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Enterprise Financial Services  vs.  First IC

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. Even with relatively invariable fundamental indicators, Enterprise Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First IC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First IC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, First IC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and First IC

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

The idea behind Enterprise Financial Services and First IC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..