Correlation Between Thrivent High and Enterprise Bancorp

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

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

Diversification Opportunities for Thrivent High and Enterprise Bancorp

0.63

Correlation Coefficient

Thrivent High  Enterprise Bancorp

Poor diversification

The 3 months correlation between Thrivent and Enterprise is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Thrivent High 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 Thrivent High Yield 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 Thrivent High i.e., Thrivent High and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Thrivent High and Enterprise Bancorp

Assuming the 90 days horizon Thrivent High is expected to generate 20.87 times less return on investment than Enterprise Bancorp. But when comparing it to its historical volatility, Thrivent High Yield is 23.28 times less risky than Enterprise Bancorp. It trades about 0.21 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,174  in Enterprise Bancorp on September 5, 2024 and sell it today you would earn a total of  460.00  from holding Enterprise Bancorp or generate 14.49% return on investment over 90 days.

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

Thrivent High Yield  vs.  Enterprise Bancorp

Thrivent High Yield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Enterprise Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 11 (%) 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 Thrivent High and Enterprise Bancorp

The main advantage of trading using opposite Thrivent High and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent High 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 Thrivent High Yield 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.