Correlation Between Enterprise Financial and Western Alliance

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

Diversification Opportunities for Enterprise Financial and Western Alliance

0.93

Correlation Coefficient

Enterprise Financial  Western Alliance

Almost no diversification

The 3 months correlation between Enterprise and Western is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Western Alliance go up and down completely randomly.

Pair Corralation between Enterprise Financial and Western Alliance

Given the investment horizon of 90 days Enterprise Financial Services is expected to generate 0.57 times more return on investment than Western Alliance. However, Enterprise Financial Services is 1.77 times less risky than Western Alliance. It trades about -0.06 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about -0.05 per unit of risk. If you would invest  5,386  in Enterprise Financial Services on January 27, 2025 and sell it today you would lose (252.00) from holding Enterprise Financial Services or give up 4.68% of portfolio value over 90 days.

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

Enterprise Financial Services  vs.  Western Alliance Bancorp.

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Enterprise Financial and Western Alliance

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

The idea behind Enterprise Financial Services and Western Alliance Bancorporation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.