Correlation Between ConnectOne Bancorp and MidWestOne Financial

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

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

Diversification Opportunities for ConnectOne Bancorp and MidWestOne Financial

0.74

Correlation Coefficient

ConnectOne Bancorp  MidWestOne Financial

Poor diversification

The 3 months correlation between ConnectOne and MidWestOne is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and MidWestOne Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidWestOne Financial 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 MidWestOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidWestOne Financial has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and MidWestOne Financial go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and MidWestOne Financial

Given the investment horizon of 90 days ConnectOne Bancorp is expected to generate 1.09 times more return on investment than MidWestOne Financial. However, ConnectOne Bancorp is 1.09 times more volatile than MidWestOne Financial Group. It trades about 0.01 of its potential returns per unit of risk. MidWestOne Financial Group is currently generating about 0.01 per unit of risk. If you would invest  2,397  in ConnectOne Bancorp on October 4, 2024 and sell it today you would lose (144.00) from holding ConnectOne Bancorp or give up 6.01% of portfolio value over 90 days.

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

ConnectOne Bancorp  vs.  MidWestOne Financial Group

ConnectOne Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConnectOne Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

MidWestOne Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MidWestOne Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, MidWestOne Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ConnectOne Bancorp and MidWestOne Financial

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

The idea behind ConnectOne Bancorp and MidWestOne Financial Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..