Correlation Between ECB Bancorp and Home Federal
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and Home Federal 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 ECB Bancorp and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and Home Federal Bancorp, you can compare the effects of market volatilities on ECB Bancorp and Home Federal 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 ECB Bancorp with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and Home Federal.
Diversification Opportunities for ECB Bancorp and Home Federal
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ECB and Home is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and ECB 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 ECB Bancorp are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and Home Federal go up and down completely randomly.
Pair Corralation between ECB Bancorp and Home Federal
Given the investment horizon of 90 days ECB Bancorp is expected to generate 0.45 times more return on investment than Home Federal. However, ECB Bancorp is 2.25 times less risky than Home Federal. It trades about 0.1 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.01 per unit of risk. If you would invest 1,429 in ECB Bancorp on August 25, 2024 and sell it today you would earn a total of 70.00 from holding ECB Bancorp or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.89% |
| Values | Daily Returns |
ECB Bancorp vs. Home Federal Bancorp
Performance |
| Timeline |
| ECB Bancorp |
| Home Federal Bancorp |
ECB Bancorp and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and Home Federal
The main advantage of trading using opposite ECB Bancorp and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.| ECB Bancorp vs. Home Federal Bancorp | ECB Bancorp vs. Magyar Bancorp | ECB Bancorp vs. Community West Bancshares | ECB Bancorp vs. Lake Shore Bancorp |
Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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