Correlation Between Enterprise Bancorp and Eagle Bancorp

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Can any of the company-specific risk be diversified away by investing in both Enterprise Bancorp and Eagle 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 Enterprise Bancorp and Eagle Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Bancorp and Eagle Bancorp Montana, you can compare the effects of market volatilities on Enterprise Bancorp and Eagle 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 Enterprise Bancorp with a short position of Eagle Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Bancorp and Eagle Bancorp.

Diversification Opportunities for Enterprise Bancorp and Eagle Bancorp

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Enterprise and Eagle is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Eagle Bancorp Montana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp Montana and Enterprise Bancorp 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 Enterprise Bancorp are associated (or correlated) with Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp Montana has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Eagle Bancorp

Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 1.36 times more return on investment than Eagle Bancorp. However, Enterprise Bancorp is 1.36 times more volatile than Eagle Bancorp Montana. It trades about -0.16 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about -0.23 per unit of risk. If you would invest  2,958  in Enterprise Bancorp on December 29, 2023 and sell it today you would lose (371.00) from holding Enterprise Bancorp or give up 12.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Enterprise Bancorp  vs.  Eagle Bancorp Montana

 Performance 
       Timeline  
Enterprise Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Eagle Bancorp Montana 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Eagle Bancorp Montana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Enterprise Bancorp and Eagle Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enterprise Bancorp and Eagle Bancorp

The main advantage of trading using opposite Enterprise Bancorp and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Bancorp position performs unexpectedly, Eagle 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 Eagle Bancorp will offset losses from the drop in Eagle Bancorp's long position.
The idea behind Enterprise Bancorp and Eagle Bancorp Montana 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.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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