Correlation Between ECB Bancorp and John Marshall
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and John Marshall 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 John Marshall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and John Marshall Bancorp, you can compare the effects of market volatilities on ECB Bancorp and John Marshall 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 John Marshall. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and John Marshall.
Diversification Opportunities for ECB Bancorp and John Marshall
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECB and John is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and John Marshall Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Marshall 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 John Marshall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Marshall Bancorp has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and John Marshall go up and down completely randomly.
Pair Corralation between ECB Bancorp and John Marshall
Given the investment horizon of 90 days ECB Bancorp is expected to generate 1.6 times less return on investment than John Marshall. But when comparing it to its historical volatility, ECB Bancorp is 1.92 times less risky than John Marshall. It trades about 0.12 of its potential returns per unit of risk. John Marshall Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,699 in John Marshall Bancorp on August 29, 2024 and sell it today you would earn a total of 610.00 from holding John Marshall Bancorp or generate 35.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECB Bancorp vs. John Marshall Bancorp
Performance |
| Timeline |
| ECB Bancorp |
| John Marshall Bancorp |
ECB Bancorp and John Marshall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and John Marshall
The main advantage of trading using opposite ECB Bancorp and John Marshall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, John Marshall 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 John Marshall will offset losses from the drop in John Marshall'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 |
| John Marshall vs. Home Federal Bancorp | John Marshall vs. Magyar Bancorp | John Marshall vs. ChoiceOne Financial Services | John Marshall vs. Affinity Bancshares |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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