Correlation Between Enterprise Financial and Blue Ridge

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

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

Diversification Opportunities for Enterprise Financial and Blue Ridge

0.95

Correlation Coefficient

Enterprise Financial  Blue Ridge

Almost no diversification

The 3 months correlation between Enterprise and Blue is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Blue Ridge Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Ridge Bankshares and Enterprise 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 Enterprise Financial Services are associated (or correlated) with Blue Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Ridge Bankshares has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Blue Ridge go up and down completely randomly.

Pair Corralation between Enterprise Financial and Blue Ridge

Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.49 times less return on investment than Blue Ridge. But when comparing it to its historical volatility, Enterprise Financial Services is 1.13 times less risky than Blue Ridge. It trades about 0.11 of its potential returns per unit of risk. Blue Ridge Bankshares is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  278.00  in Blue Ridge Bankshares on September 2, 2024 and sell it today you would earn a total of  75.00  from holding Blue Ridge Bankshares or generate 26.98% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Blue Ridge Bankshares

Enterprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Enterprise Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Ridge Bankshares

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Ridge Bankshares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, Blue Ridge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and Blue Ridge

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

The idea behind Enterprise Financial Services and Blue Ridge Bankshares 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.