Correlation Between ECB Bancorp and National Bank
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and National Bank 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 National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and National Bank Holdings, you can compare the effects of market volatilities on ECB Bancorp and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and National Bank.
Diversification Opportunities for ECB Bancorp and National Bank
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECB and National is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and National Bank go up and down completely randomly.
Pair Corralation between ECB Bancorp and National Bank
Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 2.88 times less risky than National Bank. The stock trades about -0.04 of its potential returns per unit of risk. The National Bank Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,563 in National Bank Holdings on August 30, 2024 and sell it today you would earn a total of 282.00 from holding National Bank Holdings or generate 6.18% 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. National Bank Holdings
Performance |
| Timeline |
| ECB Bancorp |
| National Bank Holdings |
ECB Bancorp and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and National Bank
The main advantage of trading using opposite ECB Bancorp and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank'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 |
| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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