Correlation Between Tectonic Financial and First Bancshares

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

Diversification Opportunities for Tectonic Financial and First Bancshares

0.27

Correlation Coefficient

Tectonic Financial  First Bancshares

Modest diversification

The 3 months correlation between Tectonic and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares 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 Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and First Bancshares go up and down completely randomly.

Pair Corralation between Tectonic Financial and First Bancshares

Assuming the 90 days horizon Tectonic Financial is expected to generate 1.91 times less return on investment than First Bancshares. But when comparing it to its historical volatility, Tectonic Financial PR is 2.13 times less risky than First Bancshares. It trades about 0.04 of its potential returns per unit of risk. First Bancshares is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  935.00  in First Bancshares on October 26, 2024 and sell it today you would earn a total of  315.00  from holding First Bancshares or generate 33.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Tectonic Financial PR  vs.  First Bancshares

Tectonic Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 7 (%) 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.

First Bancshares

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tectonic Financial and First Bancshares

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

The idea behind Tectonic Financial PR and First Bancshares 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.