Correlation Between Tectonic Financial and First Capital

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

Diversification Opportunities for Tectonic Financial and First Capital

-0.7

Correlation Coefficient

Tectonic Financial  First Capital

Excellent diversification

The 3 months correlation between Tectonic and First is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and First Capital go up and down completely randomly.

Pair Corralation between Tectonic Financial and First Capital

Assuming the 90 days horizon Tectonic Financial is expected to generate 1.83 times less return on investment than First Capital. But when comparing it to its historical volatility, Tectonic Financial PR is 3.35 times less risky than First Capital. It trades about 0.08 of its potential returns per unit of risk. First Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,746  in First Capital on October 7, 2024 and sell it today you would earn a total of  503.00  from holding First Capital or generate 18.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.8%
Values	Daily Returns

Tectonic Financial PR  vs.  First Capital

Tectonic Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 4 (%) 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.

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Tectonic Financial and First Capital

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

The idea behind Tectonic Financial PR and First Capital 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.