Correlation Between Regions Financial and Enterprise Bancorp

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

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

Diversification Opportunities for Regions Financial and Enterprise Bancorp

-0.44

Correlation Coefficient

Regions Financial  Enterprise Bancorp

Very good diversification

The 3 months correlation between Regions and Enterprise is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Regions 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Regions Financial and Enterprise Bancorp

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Enterprise Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.91 times less risky than Enterprise Bancorp. The stock trades about -0.12 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  3,684  in Enterprise Bancorp on December 1, 2024 and sell it today you would earn a total of  631.00  from holding Enterprise Bancorp or generate 17.13% return on investment over 90 days.

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

Regions Financial  vs.  Enterprise Bancorp

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Enterprise Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Bancorp are ranked lower than 8 (%) 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 Regions Financial and Enterprise Bancorp

The main advantage of trading using opposite Regions Financial and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.