Correlation Between Luther Burbank and Enterprise Bancorp

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

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

Diversification Opportunities for Luther Burbank and Enterprise Bancorp

0.31

Correlation Coefficient

Luther Burbank  Enterprise Bancorp

Weak diversification

The 3 months correlation between Luther and Enterprise is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Luther Burbank and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Luther Burbank 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 Luther Burbank 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 Luther Burbank i.e., Luther Burbank and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Luther Burbank and Enterprise Bancorp

If you would invest  3,035  in Enterprise Bancorp on September 12, 2024 and sell it today you would earn a total of  1,240  from holding Enterprise Bancorp or generate 40.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Luther Burbank  vs.  Enterprise Bancorp

Luther Burbank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luther Burbank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Luther Burbank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Enterprise Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 14 (%) 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 Luther Burbank and Enterprise Bancorp

The main advantage of trading using opposite Luther Burbank and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luther Burbank 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 Luther Burbank 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.