Correlation Between ECB Bancorp and Webster Financial
Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and Webster 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 ECB Bancorp and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECB Bancorp and Webster Financial, you can compare the effects of market volatilities on ECB Bancorp and Webster 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 ECB Bancorp with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and Webster Financial.
Diversification Opportunities for ECB Bancorp and Webster Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECB and Webster is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and Webster Financial go up and down completely randomly.
Pair Corralation between ECB Bancorp and Webster Financial
Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the Webster Financial. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 1.56 times less risky than Webster Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Webster Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,415 in Webster Financial on September 2, 2024 and sell it today you would earn a total of 1,763 from holding Webster Financial or generate 39.93% 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. Webster Financial
Performance |
| Timeline |
| ECB Bancorp |
| Webster Financial |
ECB Bancorp and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECB Bancorp and Webster Financial
The main advantage of trading using opposite ECB Bancorp and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, Webster 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 Webster Financial will offset losses from the drop in Webster Financial'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 |
| Webster Financial vs. Affinity Bancshares | Webster Financial vs. Auburn National Bancorporation | Webster Financial vs. First Community | Webster Financial vs. LINKBANCORP |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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