Correlation Between WesBanco and ECB Bancorp

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

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

Diversification Opportunities for WesBanco and ECB Bancorp

0.7

Correlation Coefficient

WesBanco  ECB Bancorp

Poor diversification

The 3 months correlation between WesBanco and ECB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding WesBanco and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB Bancorp and WesBanco 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 WesBanco 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 WesBanco i.e., WesBanco and ECB Bancorp go up and down completely randomly.

Pair Corralation between WesBanco and ECB Bancorp

Assuming the 90 days horizon WesBanco is expected to generate 0.85 times more return on investment than ECB Bancorp. However, WesBanco is 1.17 times less risky than ECB Bancorp. It trades about 0.03 of its potential returns per unit of risk. ECB Bancorp is currently generating about 0.0 per unit of risk. If you would invest  2,207  in WesBanco on September 27, 2024 and sell it today you would earn a total of  312.00  from holding WesBanco or generate 14.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

WesBanco  vs.  ECB Bancorp

WesBanco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ECB Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 3 (%) 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.

Pair Trading with WesBanco and ECB Bancorp

The main advantage of trading using opposite WesBanco and ECB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WesBanco 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.

The idea behind WesBanco and ECB Bancorp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.