Correlation Between HomeTrust Bancshares and Enterprise Bancorp

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

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

Diversification Opportunities for HomeTrust Bancshares and Enterprise Bancorp

0.6

Correlation Coefficient

HomeTrust Bancshares  Enterprise Bancorp

Poor diversification

The 3 months correlation between HomeTrust and Enterprise is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and HomeTrust Bancshares 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 HomeTrust Bancshares are associated (or correlated) with Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Enterprise Bancorp

Given the investment horizon of 90 days HomeTrust Bancshares is expected to under-perform the Enterprise Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, HomeTrust Bancshares is 2.67 times less risky than Enterprise Bancorp. The stock trades about -0.27 of its potential returns per unit of risk. The Enterprise Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,645  in Enterprise Bancorp on October 6, 2024 and sell it today you would earn a total of  281.00  from holding Enterprise Bancorp or generate 7.71% return on investment over 90 days.

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

HomeTrust Bancshares  vs.  Enterprise Bancorp

HomeTrust Bancshares

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Enterprise Bancorp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with HomeTrust Bancshares and Enterprise Bancorp

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

The idea behind HomeTrust Bancshares and Enterprise Bancorp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.