Correlation Between Tectonic Financial and Provident Financial

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

Diversification Opportunities for Tectonic Financial and Provident Financial

0.8

Correlation Coefficient

Tectonic Financial  Provident Financial

Very poor diversification

The 3 months correlation between Tectonic and Provident is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Provident Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident 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 Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and Provident Financial go up and down completely randomly.

Pair Corralation between Tectonic Financial and Provident Financial

Assuming the 90 days horizon Tectonic Financial is expected to generate 4.08 times less return on investment than Provident Financial. But when comparing it to its historical volatility, Tectonic Financial PR is 1.88 times less risky than Provident Financial. It trades about 0.06 of its potential returns per unit of risk. Provident Financial Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,422  in Provident Financial Holdings on October 1, 2024 and sell it today you would earn a total of  169.00  from holding Provident Financial Holdings or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Tectonic Financial PR  vs.  Provident Financial Holdings

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Provident Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Provident Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tectonic Financial and Provident Financial

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

The idea behind Tectonic Financial PR and Provident Financial Holdings 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.