Correlation Between ConnectOne Bancorp and Texas Capital

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

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

Diversification Opportunities for ConnectOne Bancorp and Texas Capital

-0.38

Correlation Coefficient

ConnectOne Bancorp  Texas Capital

Very good diversification

The 3 months correlation between ConnectOne and Texas is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ConnectOne Bancorp and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of ConnectOne Bancorp i.e., ConnectOne Bancorp and Texas Capital go up and down completely randomly.

Pair Corralation between ConnectOne Bancorp and Texas Capital

Assuming the 90 days horizon ConnectOne Bancorp is expected to generate 0.86 times more return on investment than Texas Capital. However, ConnectOne Bancorp is 1.16 times less risky than Texas Capital. It trades about 0.14 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about -0.06 per unit of risk. If you would invest  2,048  in ConnectOne Bancorp on September 13, 2024 and sell it today you would earn a total of  191.00  from holding ConnectOne Bancorp or generate 9.33% return on investment over 90 days.

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

ConnectOne Bancorp  vs.  Texas Capital Bancshares

ConnectOne Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 11 (%) 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 January 2025.

Texas Capital Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Texas Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ConnectOne Bancorp and Texas Capital

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

The idea behind ConnectOne Bancorp and Texas Capital Bancshares 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.