Correlation Between Western Alliance and ECB Bancorp
Can any of the company-specific risk be diversified away by investing in both Western Alliance 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 Western Alliance and ECB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Alliance Bancorporation and ECB Bancorp, you can compare the effects of market volatilities on Western Alliance 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 Western Alliance with a short position of ECB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and ECB Bancorp.
Diversification Opportunities for Western Alliance and ECB Bancorp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and ECB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB Bancorp and Western Alliance 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 Western Alliance Bancorporation 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 Western Alliance i.e., Western Alliance and ECB Bancorp go up and down completely randomly.
Pair Corralation between Western Alliance and ECB Bancorp
Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 3.17 times more return on investment than ECB Bancorp. However, Western Alliance is 3.17 times more volatile than ECB Bancorp. It trades about 0.05 of its potential returns per unit of risk. ECB Bancorp is currently generating about 0.0 per unit of risk. If you would invest 5,884 in Western Alliance Bancorporation on September 2, 2024 and sell it today you would earn a total of 3,477 from holding Western Alliance Bancorporation or generate 59.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Alliance Bancorp. vs. ECB Bancorp
Performance |
| Timeline |
| Western Alliance Ban |
| ECB Bancorp |
Western Alliance and ECB Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alliance and ECB Bancorp
The main advantage of trading using opposite Western Alliance and ECB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance 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.| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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