Correlation Between Enterprise Bancorp and Digi International

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

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

Diversification Opportunities for Enterprise Bancorp and Digi International

0.3

Correlation Coefficient

Enterprise Bancorp  Digi International

Weak diversification

The 3 months correlation between Enterprise and Digi is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Bancorp and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Enterprise 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 Enterprise Bancorp are associated (or correlated) with Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Enterprise Bancorp i.e., Enterprise Bancorp and Digi International go up and down completely randomly.

Pair Corralation between Enterprise Bancorp and Digi International

Given the investment horizon of 90 days Enterprise Bancorp is expected to generate 3.96 times less return on investment than Digi International. But when comparing it to its historical volatility, Enterprise Bancorp is 1.42 times less risky than Digi International. It trades about 0.04 of its potential returns per unit of risk. Digi International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,803  in Digi International on May 3, 2025 and sell it today you would earn a total of  458.00  from holding Digi International or generate 16.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	67.21%
Values	Daily Returns

Enterprise Bancorp  vs.  Digi International

Enterprise Bancorp

Risk-Adjusted Performance

Insignificant

Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enterprise Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Digi International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Bancorp and Digi International

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

The idea behind Enterprise Bancorp and Digi International 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 Stocks Directory module to find actively traded stocks across global markets.