Correlation Between ENB Financial and Embassy Bancorp

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

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

Diversification Opportunities for ENB Financial and Embassy Bancorp

0.34

Correlation Coefficient

ENB Financial  Embassy Bancorp

Weak diversification

The 3 months correlation between ENB and Embassy is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ENB Financial Corp and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Bancorp and ENB 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 ENB Financial Corp are associated (or correlated) with Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of ENB Financial i.e., ENB Financial and Embassy Bancorp go up and down completely randomly.

Pair Corralation between ENB Financial and Embassy Bancorp

Given the investment horizon of 90 days ENB Financial Corp is expected to generate 1.92 times more return on investment than Embassy Bancorp. However, ENB Financial is 1.92 times more volatile than Embassy Bancorp. It trades about 0.08 of its potential returns per unit of risk. Embassy Bancorp is currently generating about -0.08 per unit of risk. If you would invest  1,441  in ENB Financial Corp on February 1, 2024 and sell it today you would earn a total of  52.00  from holding ENB Financial Corp or generate 3.61% return on investment over 90 days.

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

ENB Financial Corp  vs.  Embassy Bancorp

ENB Financial Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENB Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, ENB Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Embassy Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ENB Financial and Embassy Bancorp

The main advantage of trading using opposite ENB Financial and Embassy Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENB Financial position performs unexpectedly, Embassy 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 Embassy Bancorp will offset losses from the drop in Embassy Bancorp's long position.

The idea behind ENB Financial Corp and Embassy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.