Correlation Between ConnectOne Bancorp and First Foundation

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

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

Diversification Opportunities for ConnectOne Bancorp and First Foundation

-0.4

Correlation Coefficient

ConnectOne Bancorp  First Foundation

Very good diversification

The 3 months correlation between ConnectOne and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and First Foundation go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and First Foundation

Given the investment horizon of 90 days ConnectOne Bancorp is expected to generate 0.64 times more return on investment than First Foundation. However, ConnectOne Bancorp is 1.55 times less risky than First Foundation. It trades about 0.07 of its potential returns per unit of risk. First Foundation is currently generating about -0.09 per unit of risk. If you would invest  2,255  in ConnectOne Bancorp on December 29, 2024 and sell it today you would earn a total of  165.00  from holding ConnectOne Bancorp or generate 7.32% return on investment over 90 days.

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

ConnectOne Bancorp  vs.  First Foundation

ConnectOne Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 5 (%) 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 April 2025.

First Foundation

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Foundation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ConnectOne Bancorp and First Foundation

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

The idea behind ConnectOne Bancorp and First Foundation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.