Correlation Between American National and Enterprise Bancorp

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

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

Diversification Opportunities for American National and Enterprise Bancorp

0.6

Correlation Coefficient

American National  Enterprise Bancorp

Poor diversification

The 3 months correlation between American and Enterprise is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American National Bankshares and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and American National 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 American National Bankshares 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 American National i.e., American National and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between American National and Enterprise Bancorp

If you would invest  2,448  in Enterprise Bancorp on March 3, 2024 and sell it today you would earn a total of  67.00  from holding Enterprise Bancorp or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

American National Bankshares  vs.  Enterprise Bancorp

American National

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days American National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat fragile basic indicators, American National sustained solid returns over the last few months and may actually be approaching a breakup point.

Enterprise Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with American National and Enterprise Bancorp

The main advantage of trading using opposite American National and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American National 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 American National Bankshares 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.