Correlation Between Enterprise Financial and HomeTrust Bancshares

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

Diversification Opportunities for Enterprise Financial and HomeTrust Bancshares

0.89

Correlation Coefficient

Enterprise Financial  HomeTrust Bancshares

Very poor diversification

The 3 months correlation between Enterprise and HomeTrust is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares 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 HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Enterprise Financial and HomeTrust Bancshares

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 1.05 times more return on investment than HomeTrust Bancshares. However, Enterprise Financial is 1.05 times more volatile than HomeTrust Bancshares. It trades about 0.12 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.06 per unit of risk. If you would invest  5,117  in Enterprise Financial Services on September 13, 2024 and sell it today you would earn a total of  919.00  from holding Enterprise Financial Services or generate 17.96% 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.  HomeTrust Bancshares

Enterprise Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 9 (%) 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.

HomeTrust Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enterprise Financial and HomeTrust Bancshares

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

The idea behind Enterprise Financial Services and HomeTrust Bancshares 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.