Correlation Between Tectonic Financial and Third Coast

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

Diversification Opportunities for Tectonic Financial and Third Coast

0.85

Correlation Coefficient

Tectonic Financial  Third Coast

Very poor diversification

The 3 months correlation between Tectonic and Third is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Third Coast Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Coast 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 Third Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Coast Bancshares has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and Third Coast go up and down completely randomly.

Pair Corralation between Tectonic Financial and Third Coast

Assuming the 90 days horizon Tectonic Financial is expected to generate 8.95 times less return on investment than Third Coast. But when comparing it to its historical volatility, Tectonic Financial PR is 2.09 times less risky than Third Coast. It trades about 0.05 of its potential returns per unit of risk. Third Coast Bancshares is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Third Coast Bancshares on September 13, 2024 and sell it today you would earn a total of  228.00  from holding Third Coast Bancshares or generate 6.51% 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.  Third Coast Bancshares

Tectonic Financial

Risk-Adjusted Performance

5 of 100

Modest

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

Third Coast Bancshares

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Third Coast Bancshares are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Third Coast showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tectonic Financial and Third Coast

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

The idea behind Tectonic Financial PR and Third Coast 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .