Correlation Between Enterprise Financial and FB Financial

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

Diversification Opportunities for Enterprise Financial and FB Financial

0.69

Correlation Coefficient

Enterprise Financial  FB Financial

Poor diversification

The 3 months correlation between Enterprise and FBK is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and FB Financial go up and down completely randomly.

Pair Corralation between Enterprise Financial and FB Financial

Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.63 times less return on investment than FB Financial. But when comparing it to its historical volatility, Enterprise Financial Services is 1.15 times less risky than FB Financial. It trades about 0.04 of its potential returns per unit of risk. FB Financial Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,907  in FB Financial Corp on January 3, 2025 and sell it today you would earn a total of  1,790  from holding FB Financial Corp or generate 61.58% return on investment over 90 days.

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

Enterprise Financial Services  vs.  FB Financial Corp

Enterprise Financial

Risk-Adjusted Performance

Very Weak

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

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Enterprise Financial and FB Financial

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

The idea behind Enterprise Financial Services and FB 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.