Correlation Between Home Federal and ECB Bancorp
Can any of the company-specific risk be diversified away by investing in both Home Federal and ECB Bancorp 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 Home Federal and ECB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and ECB Bancorp, you can compare the effects of market volatilities on Home Federal and ECB Bancorp 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 Home Federal with a short position of ECB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and ECB Bancorp.
Diversification Opportunities for Home Federal and ECB Bancorp
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Home and ECB is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB Bancorp and Home Federal 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 Home Federal Bancorp are associated (or correlated) with ECB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECB Bancorp has no effect on the direction of Home Federal i.e., Home Federal and ECB Bancorp go up and down completely randomly.
Pair Corralation between Home Federal and ECB Bancorp
Given the investment horizon of 90 days Home Federal is expected to generate 7.57 times less return on investment than ECB Bancorp. In addition to that, Home Federal is 2.25 times more volatile than ECB Bancorp. It trades about 0.01 of its total potential returns per unit of risk. ECB Bancorp is currently generating about 0.1 per unit of volatility. 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 |
Home Federal Bancorp vs. ECB Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| ECB Bancorp |
Home Federal and ECB Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and ECB Bancorp
The main advantage of trading using opposite Home Federal and ECB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, ECB Bancorp 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 ECB Bancorp will offset losses from the drop in ECB Bancorp's long position.The idea behind Home Federal Bancorp and ECB Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |