Correlation Between Home Bancorp and Enterprise Financial

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

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

Diversification Opportunities for Home Bancorp and Enterprise Financial

0.94

Correlation Coefficient

Home Bancorp  Enterprise Financial

Almost no diversification

The 3 months correlation between Home and Enterprise is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial and Home Bancorp 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 Home Bancorp are associated (or correlated) with Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of Home Bancorp i.e., Home Bancorp and Enterprise Financial go up and down completely randomly.

Pair Corralation between Home Bancorp and Enterprise Financial

Given the investment horizon of 90 days Home Bancorp is expected to generate 0.88 times more return on investment than Enterprise Financial. However, Home Bancorp is 1.13 times less risky than Enterprise Financial. It trades about 0.13 of its potential returns per unit of risk. Enterprise Financial Services is currently generating about 0.11 per unit of risk. If you would invest  4,226  in Home Bancorp on September 5, 2024 and sell it today you would earn a total of  773.00  from holding Home Bancorp or generate 18.29% return on investment over 90 days.

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

Home Bancorp  vs.  Enterprise Financial Services

Home Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Home Bancorp and Enterprise Financial

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

The idea behind Home Bancorp and Enterprise Financial Services 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.