Correlation Between ECB Bancorp and United Security
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and United Security 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 United Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and United Security Bancshares, you can compare the effects of market volatilities on ECB Bancorp and United Security 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 United Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and United Security.
Diversification Opportunities for ECB Bancorp and United Security
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECB and United is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and United Security Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Security Banc 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 United Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Security Banc has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and United Security go up and down completely randomly.
Pair Corralation between ECB Bancorp and United Security
Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the United Security. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 1.1 times less risky than United Security. The stock trades about 0.0 of its potential returns per unit of risk. The United Security Bancshares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 654.00 in United Security Bancshares on August 28, 2024 and sell it today you would earn a total of 316.00 from holding United Security Bancshares or generate 48.32% 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. United Security Bancshares
Performance |
| Timeline |
| ECB Bancorp |
| United Security Banc |
ECB Bancorp and United Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and United Security
The main advantage of trading using opposite ECB Bancorp and United Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, United Security 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 United Security will offset losses from the drop in United Security's long position.| ECB Bancorp vs. Fifth Third Bancorp | ECB Bancorp vs. Huntington Bancshares Incorporated | ECB Bancorp vs. MT Bank |
| United Security vs. Home Federal Bancorp | United Security vs. Lake Shore Bancorp | United Security vs. Community West Bancshares | United Security 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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