Correlation Between Tectonic Financial and CF Bankshares

Can any of the company-specific risk be diversified away by investing in both Tectonic Financial and CF Bankshares 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 CF Bankshares 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 CF Bankshares, you can compare the effects of market volatilities on Tectonic Financial and CF Bankshares 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 CF Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tectonic Financial and CF Bankshares.

Diversification Opportunities for Tectonic Financial and CF Bankshares

0.83

Correlation Coefficient

Tectonic Financial  CF Bankshares

Very poor diversification

The 3 months correlation between Tectonic and CFBK is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and CF Bankshares go up and down completely randomly.

Pair Corralation between Tectonic Financial and CF Bankshares

Assuming the 90 days horizon Tectonic Financial is expected to generate 1.35 times less return on investment than CF Bankshares. But when comparing it to its historical volatility, Tectonic Financial PR is 1.65 times less risky than CF Bankshares. It trades about 0.04 of its potential returns per unit of risk. CF Bankshares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,265  in CF Bankshares on September 4, 2024 and sell it today you would earn a total of  547.00  from holding CF Bankshares or generate 24.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.99%
Values	Daily Returns

Tectonic Financial PR  vs.  CF Bankshares

Tectonic Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tectonic Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CF Bankshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tectonic Financial and CF Bankshares

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

The idea behind Tectonic Financial PR and CF Bankshares 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.