Correlation Between Texas Capital and ConnectOne Bancorp

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

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

Diversification Opportunities for Texas Capital and ConnectOne Bancorp

-0.51

Correlation Coefficient

Texas Capital  ConnectOne Bancorp

Excellent diversification

The 3 months correlation between Texas and ConnectOne is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and ConnectOne Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConnectOne Bancorp and Texas Capital 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 Texas Capital Bancshares 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 Texas Capital i.e., Texas Capital and ConnectOne Bancorp go up and down completely randomly.

Pair Corralation between Texas Capital and ConnectOne Bancorp

Assuming the 90 days horizon Texas Capital Bancshares is expected to under-perform the ConnectOne Bancorp. In addition to that, Texas Capital is 2.32 times more volatile than ConnectOne Bancorp. It trades about -0.12 of its total potential returns per unit of risk. ConnectOne Bancorp is currently generating about 0.23 per unit of volatility. If you would invest  2,165  in ConnectOne Bancorp on September 21, 2024 and sell it today you would earn a total of  57.00  from holding ConnectOne Bancorp or generate 2.63% return on investment over 90 days.

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

Texas Capital Bancshares  vs.  ConnectOne Bancorp

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 latest inconsistent performance, the Preferred Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 weak fundamental drivers, ConnectOne Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Texas Capital and ConnectOne Bancorp

The main advantage of trading using opposite Texas Capital and ConnectOne Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital 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 Texas Capital Bancshares 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.