Correlation Between Enterprise Financial and First Financial

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

Diversification Opportunities for Enterprise Financial and First Financial

0.78

Correlation Coefficient

Enterprise Financial  First Financial

Poor diversification

The 3 months correlation between Enterprise and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and First Financial go up and down completely randomly.

Pair Corralation between Enterprise Financial and First Financial

Given the investment horizon of 90 days Enterprise Financial Services is expected to under-perform the First Financial. But the stock apears to be less risky and, when comparing its historical volatility, Enterprise Financial Services is 1.09 times less risky than First Financial. The stock trades about -0.06 of its potential returns per unit of risk. The First Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,605  in First Financial on August 13, 2025 and sell it today you would earn a total of  54.00  from holding First Financial or generate 0.96% 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.  First Financial

Enterprise Financial

Risk-Adjusted Performance

Weakest

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 unsteady 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.

First Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enterprise Financial and First Financial

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

The idea behind Enterprise Financial Services and First Financial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.