Correlation Between Enterprise Financial and OceanFirst Financial

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

Diversification Opportunities for Enterprise Financial and OceanFirst Financial

0.97

Correlation Coefficient

Enterprise Financial  OceanFirst Financial

Almost no diversification

The 3 months correlation between Enterprise and OceanFirst is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and OceanFirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OceanFirst Financial Corp 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 OceanFirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OceanFirst Financial Corp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and OceanFirst Financial go up and down completely randomly.

Pair Corralation between Enterprise Financial and OceanFirst Financial

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 0.77 times more return on investment than OceanFirst Financial. However, Enterprise Financial Services is 1.31 times less risky than OceanFirst Financial. It trades about -0.02 of its potential returns per unit of risk. OceanFirst Financial Corp is currently generating about -0.14 per unit of risk. If you would invest  5,984  in Enterprise Financial Services on September 13, 2024 and sell it today you would lose (27.00) from holding Enterprise Financial Services or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Enterprise Financial Services  vs.  OceanFirst Financial Corp

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.

OceanFirst Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, OceanFirst Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and OceanFirst Financial

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

The idea behind Enterprise Financial Services and OceanFirst Financial Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.