Correlation Between Home Federal and ConnectOne Bancorp

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

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

Diversification Opportunities for Home Federal and ConnectOne Bancorp

-0.05

Correlation Coefficient

Home Federal  ConnectOne Bancorp

Good diversification

The 3 months correlation between Home and ConnectOne is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and ConnectOne Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConnectOne Bancorp and Home Federal 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 Home Federal Bancorp are associated (or correlated) with ConnectOne Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConnectOne Bancorp has no effect on the direction of Home Federal i.e., Home Federal and ConnectOne Bancorp go up and down completely randomly.

Pair Corralation between Home Federal and ConnectOne Bancorp

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 22.95 times more return on investment than ConnectOne Bancorp. However, Home Federal is 22.95 times more volatile than ConnectOne Bancorp. It trades about 0.04 of its potential returns per unit of risk. ConnectOne Bancorp is currently generating about 0.03 per unit of risk. If you would invest  1,711  in Home Federal Bancorp on September 20, 2024 and sell it today you would lose (451.00) from holding Home Federal Bancorp or give up 26.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Home Federal Bancorp  vs.  ConnectOne Bancorp

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

ConnectOne Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, ConnectOne Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Home Federal and ConnectOne Bancorp

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

The idea behind Home Federal Bancorp and ConnectOne 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.