Correlation Between Mizuho Financial and Enterprise Bancorp

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Can any of the company-specific risk be diversified away by investing in both Mizuho Financial and Enterprise 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 Mizuho Financial and Enterprise Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mizuho Financial Group and Enterprise Bancorp, you can compare the effects of market volatilities on Mizuho Financial and Enterprise 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 Mizuho Financial with a short position of Enterprise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mizuho Financial and Enterprise Bancorp.

Diversification Opportunities for Mizuho Financial and Enterprise Bancorp

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Mizuho and Enterprise is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mizuho Financial Group and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Mizuho 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 Mizuho Financial Group are associated (or correlated) with Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of Mizuho Financial i.e., Mizuho Financial and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Mizuho Financial and Enterprise Bancorp

Considering the 90-day investment horizon Mizuho Financial Group is expected to generate 0.84 times more return on investment than Enterprise Bancorp. However, Mizuho Financial Group is 1.19 times less risky than Enterprise Bancorp. It trades about 0.07 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about -0.02 per unit of risk. If you would invest  232.00  in Mizuho Financial Group on December 29, 2023 and sell it today you would earn a total of  166.00  from holding Mizuho Financial Group or generate 71.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mizuho Financial Group  vs.  Enterprise Bancorp

 Performance 
       Timeline  
Mizuho Financial 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.
Enterprise Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mizuho Financial and Enterprise Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mizuho Financial and Enterprise Bancorp

The main advantage of trading using opposite Mizuho Financial and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mizuho Financial position performs unexpectedly, Enterprise 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 Enterprise Bancorp will offset losses from the drop in Enterprise Bancorp's long position.
The idea behind Mizuho Financial Group and Enterprise 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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