Correlation Between Enterprise Financial and Fifth Third

Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and Fifth Third 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 Fifth Third 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 Fifth Third Bancorp, you can compare the effects of market volatilities on Enterprise Financial and Fifth Third 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 Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and Fifth Third.

Diversification Opportunities for Enterprise Financial and Fifth Third

-0.44

Correlation Coefficient

Enterprise Financial  Fifth Third

Very good diversification

The 3 months correlation between Enterprise and Fifth is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Fifth Third go up and down completely randomly.

Pair Corralation between Enterprise Financial and Fifth Third

Given the investment horizon of 90 days Enterprise Financial Services is expected to under-perform the Fifth Third. In addition to that, Enterprise Financial is 2.69 times more volatile than Fifth Third Bancorp. It trades about -0.14 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  2,468  in Fifth Third Bancorp on September 21, 2024 and sell it today you would earn a total of  15.00  from holding Fifth Third Bancorp or generate 0.61% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Fifth Third Bancorp

Enterprise Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Enterprise Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Enterprise Financial and Fifth Third

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

The idea behind Enterprise Financial Services and Fifth Third 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.