Correlation Between ECB Bancorp and Hawthorn Bancshares

Can any of the company-specific risk be diversified away by investing in both ECB Bancorp and Hawthorn Bancshares 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 Hawthorn Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECB Bancorp and Hawthorn Bancshares, you can compare the effects of market volatilities on ECB Bancorp and Hawthorn Bancshares 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 Hawthorn Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECB Bancorp and Hawthorn Bancshares.

Diversification Opportunities for ECB Bancorp and Hawthorn Bancshares

-0.53

Correlation Coefficient

ECB Bancorp  Hawthorn Bancshares

Excellent diversification

The 3 months correlation between ECB and Hawthorn is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and Hawthorn Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawthorn Bancshares 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 Hawthorn Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawthorn Bancshares has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and Hawthorn Bancshares go up and down completely randomly.

Pair Corralation between ECB Bancorp and Hawthorn Bancshares

Given the investment horizon of 90 days ECB Bancorp is expected to generate 0.71 times more return on investment than Hawthorn Bancshares. However, ECB Bancorp is 1.4 times less risky than Hawthorn Bancshares. It trades about 0.02 of its potential returns per unit of risk. Hawthorn Bancshares is currently generating about 0.0 per unit of risk. If you would invest  1,505  in ECB Bancorp on December 20, 2024 and sell it today you would earn a total of  15.00  from holding ECB Bancorp or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ECB Bancorp  vs.  Hawthorn Bancshares

ECB Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ECB Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hawthorn Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawthorn Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Hawthorn Bancshares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ECB Bancorp and Hawthorn Bancshares

The main advantage of trading using opposite ECB Bancorp and Hawthorn Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp position performs unexpectedly, Hawthorn Bancshares 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 Hawthorn Bancshares will offset losses from the drop in Hawthorn Bancshares' long position.

The idea behind ECB Bancorp and Hawthorn Bancshares 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.