Correlation Between Tectonic Financial and MT Bank
Can any of the company-specific risk be diversified away by investing in both Tectonic Financial and MT Bank 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 Tectonic Financial and MT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tectonic Financial PR and MT Bank, you can compare the effects of market volatilities on Tectonic Financial and MT Bank 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 Tectonic Financial with a short position of MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tectonic Financial and MT Bank.
Diversification Opportunities for Tectonic Financial and MT Bank
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tectonic and MTB is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank and Tectonic Financial 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 Tectonic Financial PR are associated (or correlated) with MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and MT Bank go up and down completely randomly.
Pair Corralation between Tectonic Financial and MT Bank
Assuming the 90 days horizon Tectonic Financial is expected to generate 4.78 times less return on investment than MT Bank. But when comparing it to its historical volatility, Tectonic Financial PR is 2.53 times less risky than MT Bank. It trades about 0.08 of its potential returns per unit of risk. MT Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 13,613 in MT Bank on August 27, 2024 and sell it today you would earn a total of 8,499 from holding MT Bank or generate 62.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tectonic Financial PR vs. MT Bank
Performance |
| Timeline |
| Tectonic Financial |
| MT Bank |
Tectonic Financial and MT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tectonic Financial and MT Bank
The main advantage of trading using opposite Tectonic Financial and MT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tectonic Financial position performs unexpectedly, MT Bank 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 MT Bank will offset losses from the drop in MT Bank's long position.| Tectonic Financial vs. First Guaranty Bancshares | Tectonic Financial vs. First Merchants | Tectonic Financial vs. Associated Banc Corp | Tectonic Financial vs. Absa Group Limited |
| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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