Correlation Between Fifth Third and ENB Financial

Can any of the company-specific risk be diversified away by investing in both Fifth Third and ENB 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 Fifth Third and ENB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Fifth Third and ENB Financial

-0.02

Correlation Coefficient

Fifth Third  ENB Financial

Good diversification

The 3 months correlation between Fifth and ENB is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and ENB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENB Financial Corp and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with ENB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENB Financial Corp has no effect on the direction of Fifth Third i.e., Fifth Third and ENB Financial go up and down completely randomly.

Pair Corralation between Fifth Third and ENB Financial

Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 1.05 times more return on investment than ENB Financial. However, Fifth Third is 1.05 times more volatile than ENB Financial Corp. It trades about 0.16 of its potential returns per unit of risk. ENB Financial Corp is currently generating about -0.02 per unit of risk. If you would invest  3,530  in Fifth Third Bancorp on February 5, 2024 and sell it today you would earn a total of  226.00  from holding Fifth Third Bancorp or generate 6.4% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  ENB Financial Corp

Fifth Third Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third sustained solid returns over the last few months and may actually be approaching a breakup point.

ENB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, ENB Financial is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fifth Third and ENB Financial

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

The idea behind Fifth Third Bancorp and ENB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.