Correlation Between First Republic and ConnectOne Bancorp

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

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

Diversification Opportunities for First Republic and ConnectOne Bancorp

-0.62

Correlation Coefficient

First Republic  ConnectOne Bancorp

Excellent diversification

The 3 months correlation between First and ConnectOne is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and ConnectOne Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConnectOne Bancorp and First Republic 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 First Republic Bank 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 First Republic i.e., First Republic and ConnectOne Bancorp go up and down completely randomly.

Pair Corralation between First Republic and ConnectOne Bancorp

If you would invest  2,016  in ConnectOne Bancorp on September 1, 2024 and sell it today you would earn a total of  204.00  from holding ConnectOne Bancorp or generate 10.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

First Republic Bank  vs.  ConnectOne Bancorp

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, First Republic is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

ConnectOne Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ConnectOne Bancorp are ranked lower than 12 (%) 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 December 2024.

Pair Trading with First Republic and ConnectOne Bancorp

The main advantage of trading using opposite First Republic and ConnectOne Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 First Republic Bank 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.