Correlation Between Tectonic Financial and Enterprise Bancorp

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

Diversification Opportunities for Tectonic Financial and Enterprise Bancorp

-0.83

Correlation Coefficient

Tectonic Financial  Enterprise Bancorp

Pay attention - limited upside

The 3 months correlation between Tectonic and Enterprise is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp 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 Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of Tectonic Financial i.e., Tectonic Financial and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Tectonic Financial and Enterprise Bancorp

Assuming the 90 days horizon Tectonic Financial PR is expected to generate 0.27 times more return on investment than Enterprise Bancorp. However, Tectonic Financial PR is 3.71 times less risky than Enterprise Bancorp. It trades about 0.16 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about -0.03 per unit of risk. If you would invest  1,021  in Tectonic Financial PR on January 30, 2024 and sell it today you would earn a total of  18.00  from holding Tectonic Financial PR or generate 1.76% return on investment over 90 days.

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

Tectonic Financial PR  vs.  Enterprise Bancorp

Tectonic Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 10 (%) 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.

Enterprise Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Tectonic Financial and Enterprise Bancorp

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

The idea behind Tectonic Financial PR and Enterprise Bancorp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.