Correlation Between ConnectOne Bancorp and Cathay General

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

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

Diversification Opportunities for ConnectOne Bancorp and Cathay General

0.91

Correlation Coefficient

ConnectOne Bancorp  Cathay General

Almost no diversification

The 3 months correlation between ConnectOne and Cathay is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and Cathay General Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay General Bancorp and ConnectOne 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 ConnectOne Bancorp are associated (or correlated) with Cathay General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay General Bancorp has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and Cathay General go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and Cathay General

Given the investment horizon of 90 days ConnectOne Bancorp is expected to generate 1.26 times more return on investment than Cathay General. However, ConnectOne Bancorp is 1.26 times more volatile than Cathay General Bancorp. It trades about 0.04 of its potential returns per unit of risk. Cathay General Bancorp is currently generating about 0.05 per unit of risk. If you would invest  2,213  in ConnectOne Bancorp on September 13, 2024 and sell it today you would earn a total of  451.00  from holding ConnectOne Bancorp or generate 20.38% return on investment over 90 days.

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

ConnectOne Bancorp  vs.  Cathay General Bancorp

ConnectOne Bancorp

Risk-Adjusted Performance

4 of 100

Modest

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

Cathay General Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay General Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Cathay General showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ConnectOne Bancorp and Cathay General

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

The idea behind ConnectOne Bancorp and Cathay General 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.