Correlation Between Tectonic Financial and CVB Financial

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

Diversification Opportunities for Tectonic Financial and CVB Financial

0.72

Correlation Coefficient

Tectonic Financial  CVB Financial

Poor diversification

The 3 months correlation between Tectonic and CVB is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and CVB Financial go up and down completely randomly.

Pair Corralation between Tectonic Financial and CVB Financial

Assuming the 90 days horizon Tectonic Financial is expected to generate 6.88 times less return on investment than CVB Financial. But when comparing it to its historical volatility, Tectonic Financial PR is 4.0 times less risky than CVB Financial. It trades about 0.07 of its potential returns per unit of risk. CVB Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,769  in CVB Financial on October 8, 2024 and sell it today you would earn a total of  351.00  from holding CVB Financial or generate 19.84% 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.  CVB Financial

Tectonic Financial

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 5 (%) 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 current stock price agitation, may contribute to short-term losses for the retail investors.

CVB Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tectonic Financial and CVB Financial

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

The idea behind Tectonic Financial PR and CVB 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.