Correlation Between Enterprise Financial and Hanover Bancorp

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

Diversification Opportunities for Enterprise Financial and Hanover Bancorp

0.84

Correlation Coefficient

Enterprise Financial  Hanover Bancorp

Very poor diversification

The 3 months correlation between Enterprise and Hanover is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Hanover Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover 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 Hanover Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Bancorp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Hanover Bancorp go up and down completely randomly.

Pair Corralation between Enterprise Financial and Hanover Bancorp

Given the investment horizon of 90 days Enterprise Financial is expected to generate 2.29 times less return on investment than Hanover Bancorp. In addition to that, Enterprise Financial is 1.05 times more volatile than Hanover Bancorp. It trades about 0.07 of its total potential returns per unit of risk. Hanover Bancorp is currently generating about 0.17 per unit of volatility. If you would invest  1,861  in Hanover Bancorp on September 23, 2024 and sell it today you would earn a total of  513.00  from holding Hanover Bancorp or generate 27.57% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Hanover 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 conflicting basic indicators, Enterprise Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanover Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanover Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Hanover Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and Hanover Bancorp

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

The idea behind Enterprise Financial Services and Hanover 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.