Correlation Between ECB Bancorp and United Bankshares

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

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

Diversification Opportunities for ECB Bancorp and United Bankshares

0.46

Correlation Coefficient

ECB Bancorp  United Bankshares

Very weak diversification

The 3 months correlation between ECB and United is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and United Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankshares 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 United Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bankshares has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and United Bankshares go up and down completely randomly.

Pair Corralation between ECB Bancorp and United Bankshares

Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the United Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 1.21 times less risky than United Bankshares. The stock trades about 0.0 of its potential returns per unit of risk. The United Bankshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,586  in United Bankshares on October 20, 2024 and sell it today you would earn a total of  267.00  from holding United Bankshares or generate 7.45% return on investment over 90 days.

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

ECB Bancorp  vs.  United Bankshares

ECB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

United Bankshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Bankshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, United Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ECB Bancorp and United Bankshares

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

The idea behind ECB Bancorp and United Bankshares 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.