Correlation Between Northwest Bancshares and Enterprise Bancorp
Can any of the company-specific risk be diversified away by investing in both Northwest 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 Northwest 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 Northwest Bancshares and Enterprise Bancorp, you can compare the effects of market volatilities on Northwest 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 Northwest Bancshares with a short position of Enterprise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Bancshares and Enterprise Bancorp.
Diversification Opportunities for Northwest Bancshares and Enterprise Bancorp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northwest and Enterprise is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Bancshares and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Northwest 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 Northwest 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 Northwest Bancshares i.e., Northwest Bancshares and Enterprise Bancorp go up and down completely randomly.
Pair Corralation between Northwest Bancshares and Enterprise Bancorp
Given the investment horizon of 90 days Northwest Bancshares is expected to generate 0.86 times more return on investment than Enterprise Bancorp. However, Northwest Bancshares is 1.16 times less risky than Enterprise Bancorp. It trades about -0.06 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about -0.07 per unit of risk. If you would invest 1,190 in Northwest Bancshares on February 11, 2024 and sell it today you would lose (76.00) from holding Northwest Bancshares or give up 6.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Bancshares vs. Enterprise Bancorp
Performance |
| Timeline |
| Northwest Bancshares |
| Enterprise Bancorp |
Northwest Bancshares and Enterprise Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Bancshares and Enterprise Bancorp
The main advantage of trading using opposite Northwest Bancshares and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest 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.| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First Bancshares |
| Enterprise Bancorp vs. Cullman Bancorp | Enterprise Bancorp vs. HMN Financial | Enterprise Bancorp vs. Home Federal Bancorp | Enterprise Bancorp vs. First Northwest Bancorp |
Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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