Correlation Between First Merchants and Tectonic Financial
Can any of the company-specific risk be diversified away by investing in both First Merchants and Tectonic Financial 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 Merchants and Tectonic Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Tectonic Financial PR, you can compare the effects of market volatilities on First Merchants and Tectonic Financial 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 Merchants with a short position of Tectonic Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Tectonic Financial.
Diversification Opportunities for First Merchants and Tectonic Financial
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Tectonic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Tectonic Financial PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic Financial and First Merchants 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 Merchants are associated (or correlated) with Tectonic Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Financial has no effect on the direction of First Merchants i.e., First Merchants and Tectonic Financial go up and down completely randomly.
Pair Corralation between First Merchants and Tectonic Financial
Assuming the 90 days horizon First Merchants is expected to generate 1.39 times less return on investment than Tectonic Financial. But when comparing it to its historical volatility, First Merchants is 1.12 times less risky than Tectonic Financial. It trades about 0.03 of its potential returns per unit of risk. Tectonic Financial PR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 863.00 in Tectonic Financial PR on November 5, 2024 and sell it today you would earn a total of 187.00 from holding Tectonic Financial PR or generate 21.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
First Merchants vs. Tectonic Financial PR
Performance |
| Timeline |
| First Merchants |
| Tectonic Financial |
First Merchants and Tectonic Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Tectonic Financial
The main advantage of trading using opposite First Merchants and Tectonic Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Tectonic Financial 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 Tectonic Financial will offset losses from the drop in Tectonic Financial's long position.| First Merchants vs. Heartland Financial USA | First Merchants vs. OceanFirst Financial Corp | First Merchants vs. Old National Bancorp | First Merchants vs. Old National Bancorp |
| Tectonic Financial vs. First Guaranty Bancshares | Tectonic Financial vs. First Merchants | Tectonic Financial vs. Associated Banc Corp | Tectonic Financial vs. Bridgewater Bancshares Depositary |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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