Correlation Between Wells Fargo and ECB Bancorp
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and ECB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and ECB Bancorp, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of ECB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and ECB Bancorp.
Diversification Opportunities for Wells Fargo and ECB Bancorp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and ECB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB Bancorp and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and ECB Bancorp go up and down completely randomly.
Pair Corralation between Wells Fargo and ECB Bancorp
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.19 times more return on investment than ECB Bancorp. However, Wells Fargo is 1.19 times more volatile than ECB Bancorp. It trades about 0.11 of its potential returns per unit of risk. ECB Bancorp is currently generating about 0.03 per unit of risk. If you would invest 4,008 in Wells Fargo on September 4, 2024 and sell it today you would earn a total of 3,520 from holding Wells Fargo or generate 87.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. ECB Bancorp
Performance |
| Timeline |
| Wells Fargo |
| ECB Bancorp |
Wells Fargo and ECB Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and ECB Bancorp
The main advantage of trading using opposite Wells Fargo and ECB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Citigroup | Wells Fargo vs. Aquagold International | Wells Fargo vs. Thrivent High Yield | Wells Fargo vs. Morningstar Unconstrained Allocation |
| ECB Bancorp vs. International Bancshares | ECB Bancorp vs. Finward Bancorp | ECB Bancorp vs. Aquagold International | ECB Bancorp vs. Thrivent High Yield |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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