Correlation Between ECB Bancorp and Community West

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

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

Diversification Opportunities for ECB Bancorp and Community West

0.0

Correlation Coefficient

ECB Bancorp  Community West

Pay attention - limited upside

The 3 months correlation between ECB and Community is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West 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 Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of ECB Bancorp i.e., ECB Bancorp and Community West go up and down completely randomly.

Pair Corralation between ECB Bancorp and Community West

Given the investment horizon of 90 days ECB Bancorp is expected to under-perform the Community West. But the stock apears to be less risky and, when comparing its historical volatility, ECB Bancorp is 1.05 times less risky than Community West. The stock trades about -0.01 of its potential returns per unit of risk. The Community West Bancshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,738  in Community West Bancshares on May 1, 2025 and sell it today you would earn a total of  217.00  from holding Community West Bancshares or generate 12.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ECB Bancorp  vs.  Community West Bancshares

ECB Bancorp

Risk-Adjusted Performance

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.

Community West Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECB Bancorp and Community West

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

The idea behind ECB Bancorp and Community West 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.