Correlation Between Tectonic Financial and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both Tectonic Financial and Territorial 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 Tectonic Financial and Territorial Bancorp 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 Territorial Bancorp, you can compare the effects of market volatilities on Tectonic Financial and Territorial 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 Tectonic Financial with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tectonic Financial and Territorial Bancorp.
Diversification Opportunities for Tectonic Financial and Territorial Bancorp
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tectonic and Territorial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp 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 Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and Territorial Bancorp go up and down completely randomly.
Pair Corralation between Tectonic Financial and Territorial Bancorp
Assuming the 90 days horizon Tectonic Financial is expected to generate 4.54 times less return on investment than Territorial Bancorp. But when comparing it to its historical volatility, Tectonic Financial PR is 2.47 times less risky than Territorial Bancorp. It trades about 0.07 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,013 in Territorial Bancorp on August 29, 2024 and sell it today you would earn a total of 82.00 from holding Territorial Bancorp or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tectonic Financial PR vs. Territorial Bancorp
Performance |
| Timeline |
| Tectonic Financial |
| Territorial Bancorp |
Tectonic Financial and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tectonic Financial and Territorial Bancorp
The main advantage of trading using opposite Tectonic Financial and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tectonic Financial position performs unexpectedly, Territorial 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 Territorial Bancorp will offset losses from the drop in Territorial Bancorp's long position.| Tectonic Financial vs. First Guaranty Bancshares | Tectonic Financial vs. First Merchants | Tectonic Financial vs. Associated Banc Corp | Tectonic Financial vs. Bridgewater Bancshares Depositary |
| Territorial Bancorp vs. First Hawaiian | Territorial Bancorp vs. Bank of Hawaii | Territorial Bancorp vs. Financial Institutions | Territorial Bancorp vs. Heritage Financial |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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