Correlation Between Tectonic Financial and National Bankshares

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

Diversification Opportunities for Tectonic Financial and National Bankshares

-0.51

Correlation Coefficient

Tectonic Financial  National Bankshares

Excellent diversification

The 3 months correlation between Tectonic and National is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and National Bankshares go up and down completely randomly.

Pair Corralation between Tectonic Financial and National Bankshares

Assuming the 90 days horizon Tectonic Financial PR is expected to generate 0.5 times more return on investment than National Bankshares. However, Tectonic Financial PR is 2.01 times less risky than National Bankshares. It trades about 0.06 of its potential returns per unit of risk. National Bankshares is currently generating about -0.21 per unit of risk. If you would invest  1,040  in Tectonic Financial PR on January 4, 2025 and sell it today you would earn a total of  12.00  from holding Tectonic Financial PR or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tectonic Financial PR  vs.  National Bankshares

Tectonic Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 6 (%) 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.

National Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Tectonic Financial and National Bankshares

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

The idea behind Tectonic Financial PR and National Bankshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.