Correlation Between First Guaranty and Enterprise Financial

Can any of the company-specific risk be diversified away by investing in both First Guaranty and Enterprise Financial 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 First Guaranty and Enterprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Guaranty Bancshares and Enterprise Financial Services, you can compare the effects of market volatilities on First Guaranty and Enterprise Financial 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 First Guaranty with a short position of Enterprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and Enterprise Financial.

Diversification Opportunities for First Guaranty and Enterprise Financial

0.2

Correlation Coefficient

First Guaranty  Enterprise Financial

Modest diversification

The 3 months correlation between First and Enterprise is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial and First Guaranty 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 First Guaranty Bancshares are associated (or correlated) with Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of First Guaranty i.e., First Guaranty and Enterprise Financial go up and down completely randomly.

Pair Corralation between First Guaranty and Enterprise Financial

Given the investment horizon of 90 days First Guaranty Bancshares is expected to under-perform the Enterprise Financial. In addition to that, First Guaranty is 2.19 times more volatile than Enterprise Financial Services. It trades about -0.17 of its total potential returns per unit of risk. Enterprise Financial Services is currently generating about -0.01 per unit of volatility. If you would invest  5,608  in Enterprise Financial Services on December 29, 2024 and sell it today you would lose (76.00) from holding Enterprise Financial Services or give up 1.36% of portfolio value over 90 days.

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

First Guaranty Bancshares  vs.  Enterprise Financial Services

First Guaranty Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Guaranty Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with First Guaranty and Enterprise Financial

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

The idea behind First Guaranty Bancshares and Enterprise Financial Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.