Correlation Between TC Bancshares and Main Street

Can any of the company-specific risk be diversified away by investing in both TC Bancshares and Main Street 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 TC Bancshares and Main Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for TC Bancshares and Main Street

-0.03

Correlation Coefficient

TC Bancshares  Main Street

Good diversification

The 3 months correlation between TCBC and Main is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding TC Bancshares and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial and TC Bancshares 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 TC Bancshares are associated (or correlated) with Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of TC Bancshares i.e., TC Bancshares and Main Street go up and down completely randomly.

Pair Corralation between TC Bancshares and Main Street

Given the investment horizon of 90 days TC Bancshares is expected to under-perform the Main Street. But the stock apears to be less risky and, when comparing its historical volatility, TC Bancshares is 1.56 times less risky than Main Street. The stock trades about -0.01 of its potential returns per unit of risk. The Main Street Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,534  in Main Street Financial on October 7, 2024 and sell it today you would lose (104.00) from holding Main Street Financial or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.66%
Values	Daily Returns

TC Bancshares  vs.  Main Street Financial

TC Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TC Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TC Bancshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Main Street Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TC Bancshares and Main Street

The main advantage of trading using opposite TC Bancshares and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Bancshares position performs unexpectedly, Main Street 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 Main Street will offset losses from the drop in Main Street's long position.

The idea behind TC Bancshares and Main Street Financial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.