Correlation Between ConnectOne Bancorp and Reserve Petroleum

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

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

Diversification Opportunities for ConnectOne Bancorp and Reserve Petroleum

0.37

Correlation Coefficient

ConnectOne Bancorp  Reserve Petroleum

Weak diversification

The 3 months correlation between ConnectOne and Reserve is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and The Reserve Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Petroleum 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 Reserve Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reserve Petroleum has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and Reserve Petroleum go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and Reserve Petroleum

Assuming the 90 days horizon ConnectOne Bancorp is expected to generate 4.82 times less return on investment than Reserve Petroleum. But when comparing it to its historical volatility, ConnectOne Bancorp is 3.49 times less risky than Reserve Petroleum. It trades about 0.08 of its potential returns per unit of risk. The Reserve Petroleum is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  16,150  in The Reserve Petroleum on October 15, 2024 and sell it today you would earn a total of  950.00  from holding The Reserve Petroleum or generate 5.88% return on investment over 90 days.

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

ConnectOne Bancorp  vs.  The Reserve Petroleum

ConnectOne Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, ConnectOne Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Reserve Petroleum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Reserve Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Reserve Petroleum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ConnectOne Bancorp and Reserve Petroleum

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

The idea behind ConnectOne Bancorp and The Reserve Petroleum 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.