Correlation Between Tectonic Financial and Commerce Bancshares
Can any of the company-specific risk be diversified away by investing in both Tectonic Financial and Commerce 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 Commerce 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 Commerce Bancshares, you can compare the effects of market volatilities on Tectonic Financial and Commerce 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 Commerce Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tectonic Financial and Commerce Bancshares.
Diversification Opportunities for Tectonic Financial and Commerce Bancshares
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tectonic and Commerce is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce 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 Commerce Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Bancshares has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and Commerce Bancshares go up and down completely randomly.
Pair Corralation between Tectonic Financial and Commerce Bancshares
Assuming the 90 days horizon Tectonic Financial is expected to generate 2.37 times less return on investment than Commerce Bancshares. But when comparing it to its historical volatility, Tectonic Financial PR is 2.05 times less risky than Commerce Bancshares. It trades about 0.16 of its potential returns per unit of risk. Commerce Bancshares is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 5,184 in Commerce Bancshares on February 20, 2024 and sell it today you would earn a total of 512.00 from holding Commerce Bancshares or generate 9.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Tectonic Financial PR vs. Commerce Bancshares
Performance |
Timeline |
Tectonic Financial |
Commerce Bancshares |
Tectonic Financial and Commerce Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tectonic Financial and Commerce Bancshares
The main advantage of trading using opposite Tectonic Financial and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tectonic Financial position performs unexpectedly, Commerce 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 Commerce Bancshares will offset losses from the drop in Commerce Bancshares' long position.Tectonic Financial vs. First Guaranty Bancshares | Tectonic Financial vs. First Merchants | Tectonic Financial vs. Associated Banc Corp | Tectonic Financial vs. Bridgewater Bancshares Depositary |
Commerce Bancshares vs. Affinity Bancshares | Commerce Bancshares vs. Community West Bancshares | Commerce Bancshares vs. Cullman Bancorp | Commerce Bancshares vs. Home Federal Bancorp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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