CTS’s Historic Drawdowns Meet a Surge in Alpha

Why the company’s high‑volatility rally could test its risk resilience over the next year

CTS CTS Corporation

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

CTS Corporation (CTS) — Return Performance

CTS Corporation delivered strong absolute returns over the past 6‑12 months, posting a 46.61% gain in the trailing six‑month window and a 47.64% increase year‑to‑date. Relative to its sector benchmark (XLK), CTS generated positive alpha across most horizons—most notably +38.74% alpha over six months and +28.64% over one year—indicating outperformance that far exceeds the sector’s performance during those periods. However, shorter‑term dynamics show a modest 0.47% alpha in the last month despite a -2.12% price decline, suggesting recent headwinds that have temporarily muted its edge.

Period Returns vs S&P 500 & XLK

Monthly Returns Heatmap

CTS

CTS produced meaningful outperformance over medium and long horizons, with six‑month alpha of +38.74% and three‑year alpha of -17.3%, the latter reflecting a modest underperformance relative to the sector despite a robust 48.62% total return. The one‑month period revealed a small positive alpha (+0.47%) amid a negative price move, highlighting short‑term volatility that temporarily eroded its upside while still maintaining a slight edge over the benchmark.

Returns Overview

CTS Corporation (CTS) — Return Charts

Volatility Analysis

CTS Corporation (CTS) — Volatility Profile

CTS Corporation exhibits markedly higher price variability than the broader market, with an annualized volatility of 34.14% compared to the S&P 500’s 17.78%, indicating roughly double the fluctuation magnitude. The stock’s downside risk is pronounced: a downside deviation of 24.57% reflects substantial loss‑side movement, and a historic maximum drawdown of -52.6% persisted for nearly three years from July 2018 to May 2021, underscoring vulnerability during prolonged market stress. Recent short‑term volatility remains elevated, as the 60‑day vol of 39.54% exceeds the long‑term 252‑day average of 33.5%, suggesting that current market conditions or company‑specific factors are amplifying price swings beyond historical norms.

Volatility Metrics

CTS

The stock’s volatility is approximately 92% higher than the S&P 500 benchmark, signaling a risk profile suited to investors comfortable with larger price swings. Downside metrics—24.57% downside deviation and a -52.6% max drawdown lasting roughly 34 months—highlight significant tail‑risk exposure, meaning adverse moves can be deep and prolonged. While the 60‑day volatility of 39.54% is above the long‑term 252‑day average of 33.5%, indicating heightened short‑run risk, the longer‑term figure still remains well above market averages, confirming a consistently aggressive risk character.

CTS’s annualized volatility (34.14%) is nearly double that of the S&P 500 (17.78%).
Downside deviation stands at 24.57%, reflecting strong loss‑side sensitivity.
Maximum historical drawdown of -52.6% lasted about 34 months, showing prolonged downside risk.
Current 60‑day volatility (39.54%) exceeds the 252‑day average (33.5%), indicating elevated short‑term turbulence.

Positive Characteristics
The recovery from the deep drawdown was completed by May 2021, demonstrating resilience after severe price declines.

Volatility Analysis

CTS Corporation (CTS) — Volatility & Drawdown Charts

Beta & Correlation

CTS Corporation (CTS) — Beta Profile

CTS Corporation exhibits a trailing beta of 1.048 versus the S&P 500, placing it squarely in the market‑like range (0.8‑1.2). This indicates that, on average, the stock moves roughly in line with broad market fluctuations, neither markedly defensive nor aggressively volatile. However, its upside beta of 1.02 and downside beta of 0.954 reveal a modest asymmetry: the share tends to underperform slightly during market declines while matching gains in rising markets, an attribute that can soften drawdowns for risk‑aware investors. The R‑squared of 29.8% shows that less than one‑third of CTS’s price variation is explained by overall market movements, implying a substantial idiosyncratic component (70.2%) and suggesting the stock offers meaningful diversification benefits within a broader portfolio.

Beta & Correlation Metrics

CTS

With a market beta just above unity, CTS behaves similarly to the S&P 500 but its sector beta of 0.695 signals that only about two‑thirds of its systematic risk stems from technology‑sector dynamics (XLK). The lower sector correlation (0.486) and sector R² of 23.6% further emphasize that company‑specific factors dominate performance, reducing exposure to sector‑wide shocks. Consequently, investors should view CTS as a blend of market‑linked equity with a sizable component of firm‑level risk, offering both growth alignment with the broader market and diversification away from pure technology trends.

Trailing beta of 1.048 classifies CTS as market‑like rather than defensive or aggressive.
Upside beta (1.02) exceeds downside beta (0.954), indicating slightly better participation in rally markets versus declines.
R-squared of 29.8% means only ~30% of price movement is driven by the S&P 500, leaving a large idiosyncratic risk portion.
Systematic risk accounts for 29.8% while idiosyncratic risk makes up 70.2%, highlighting strong diversification potential.
Sector beta of 0.695 and sector R² of 23.6% show that technology‑sector exposure is modest; most variance originates from company‑specific drivers.

Positive Characteristics
Beta close to 1 provides familiar market exposure without excessive volatility.
Downside beta below 1 (0.954) suggests a slightly muted response during market downturns, offering a defensive tilt.
High idiosyncratic risk (70.2%) can improve portfolio diversification when combined with other assets.

Beta & Correlation

CTS Corporation (CTS) — Rolling Beta

Positive Notes

Beta close to 1 provides familiar market exposure without excessive volatility.

Downside beta below 1 (0.954) suggests a slightly muted response during market downturns, offering a defensive tilt.

High idiosyncratic risk (70.2%) can improve portfolio diversification when combined with other assets.

Risk-Adjusted Returns

CTS Corporation (CTS) — Risk-Adjusted Performance

CTS Corporation delivers modest risk‑adjusted returns relative to the risk‑free benchmark of 3.63%. The Sharpe ratio of 0.412 indicates that total return per unit of total volatility falls well short of the >1.0 threshold typically associated with attractive risk‑adjusted performance, while the Sortino ratio of 0.572—higher than the Sharpe—suggests that downside volatility is less pronounced than overall volatility. The Calmar ratio of 0.336 reflects a relatively steep maximum drawdown compared to average returns, and an Information ratio of 0.171 signals only marginal consistency in generating alpha above a benchmark. Overall, CTS’s risk‑adjusted profile points to limited upside potential with notable exposure to drawdowns.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

CTS

The Sharpe ratio of 0.412 translates to roughly $0.41 of excess return for each unit of total risk, underscoring a modest reward for the volatility borne by investors. However, the Sortino ratio of 0.572 exceeds the Sharpe, indicating that when isolating downside deviation, CTS exhibits a more favorable risk‑adjusted payoff; this asymmetry suggests that upside moves are relatively stronger than downside shocks. The Calmar ratio of 0.336 reveals that the firm’s average annualized return is only about one‑third of its worst historical drawdown, highlighting susceptibility to significant capital erosion during adverse market phases.

CTS’s Sharpe ratio (0.412) is well below the desirable >1.0 benchmark, indicating weak risk‑adjusted returns.
The Sortino ratio (0.572) exceeds the Sharpe, pointing to a comparatively gentler downside volatility profile.
A Calmar ratio of 0.336 signals that worst‑case drawdowns are severe relative to average returns.
Information ratio of 0.171 suggests only modest consistency in generating excess return over a benchmark.

Positive Characteristics
Sortino ratio above Sharpe indicates the downside risk is less pronounced than total volatility.
Treynor ratio of 13.408 reflects strong return per unit of systematic (beta) risk, implying that market exposure is rewarded at a high rate.

Risk-Adjusted Returns

CTS Corporation (CTS) — Rolling Sharpe & Sortino

Positive Notes

Sortino ratio above Sharpe indicates the downside risk is less pronounced than total volatility.

Treynor ratio of 13.408 reflects strong return per unit of systematic (beta) risk, implying that market exposure is rewarded at a high rate.

Market Regime Analysis

CTS Corporation (CTS) — Regime Behavior

CTS Corporation exhibits modestly higher returns in bullish environments, with an average monthly performance of 2.74% during Bull-HighVol periods compared to 2.45% in calmer Bull-LowVol markets. The stock’s downside resilience is limited; it declines by -1.92% on average in Bear-HighVol regimes and -1.45% in Bear-LowVol, indicating a greater sensitivity to market stress than to bullish momentum. Its upside capture of 117.3% and downside capture of 100.8% yield a capture ratio of 1.16, suggesting that while the company participates more fully in market gains, it also tracks losses almost one‑for‑one when markets fall.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

CTS

In Bull-LowVol conditions, CTS delivers a solid 2.45% monthly return, reflecting stable earnings and the ability to benefit from a steady uptrend. The heightened volatility of Bull-HighVol periods marginally improves performance to 2.74%, indicating that the business can leverage growth opportunities amid market turbulence without significant downside risk. However, in Bear-LowVol regimes the stock turns negative at -1.45% per month, and the impact intensifies to -1.92% during Bear-HighVol episodes, revealing limited defensive characteristics and a propensity to follow broader equity declines closely.

Market Regime Analysis

CTS Corporation (CTS) — Regime & Capture Charts

Regime Timeline

CTS’s upside capture of 117.3% exceeds the S&P 500 benchmark, confirming strong participation in market rallies.
Downside capture of 100.8% shows near‑parity with market losses, limiting its defensive appeal during bear markets.
The capture ratio of 1.16 indicates more upside than downside exposure, but the margin is modest relative to truly defensive stocks whose ratios often exceed 0.9 on the downside side.
Performance improves slightly in volatile bullish periods (2.74% vs 2.45%), suggesting the company can tolerate higher market turbulence when trends remain positive.

Positive Characteristics
Higher average return during Bull-HighVol regimes demonstrates resilience to volatility when markets are rising.
Upside capture above 115% signals effective growth drivers that amplify gains in a strong equity environment.

Investment Highlights & Risk Summary

CTS Corporation (CTS) — Summary & Implications

CTS Corporation delivered a 47.6% total return over the past year, generating an absolute alpha of 28.6% versus the S&P 500 and outpacing its technology sector benchmark XLK by 4.9%. The stock’s upside capture of 117.3% indicates strong participation in market rallies, yet the downside capture of 100.8% signals that it does not shield investors from broader market declines. Risk metrics are mixed: a Sharpe ratio of 0.41 reflects modest excess return per unit of total risk, while annualized volatility of 34.1% and a maximum drawdown of -52.6% highlight substantial price swings and capital loss potential. Investors should weigh the compelling return profile against the elevated volatility and deep drawdown history when considering CTS for medium‑term exposure (6–18 months).

Summary Dashboard

Investment Highlights

Year-to-date total return of 47.6% translates into a robust absolute alpha of 28.6% versus the S&P 500, underscoring strong price appreciation.
Upside capture of 117.3% shows the stock participates more than proportionally in market gains, providing upside potential when equities rise.
Sector beta of 0.695 and overall beta of 1.048 suggest CTS moves roughly in line with the broader market while offering modestly lower systematic risk relative to its sector peers.
Alpha versus XLK of 4.85% demonstrates that CTS has outperformed its immediate technology peer group over the past year.

Risk-Return Rankings

CTS ELEVATED

High return with significant volatility and a deep drawdown history yields an elevated risk profile.

Strength: Strong absolute alpha of 28.6% versus the S&P 500.

Concern: Maximum drawdown of -52.6% indicates potential for large capital losses.

Key Takeaways

CTS’s return performance is among the strongest in its sector, but it comes with a high volatility environment.
The stock’s Sharpe ratio of 0.41 signals modest risk‑adjusted returns; investors should not expect superior compensation for the risk taken.
Upside capture exceeds 100% while downside capture is near parity, meaning upside gains are captured well but defensive protection is limited.
A deep drawdown flag highlights the need for careful position sizing and potential stop‑loss discipline.

PORTFOLIO IMPLICATIONS

CTS can serve as a growth‑oriented satellite holding within a diversified equity portfolio, offering high return potential during bullish market regimes. However, its elevated volatility and historic drawdown suggest it should be paired with lower‑beta or defensive assets to temper overall portfolio risk, especially for investors with moderate risk tolerance targeting the next 6–18 months.

CTS

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

Past performance is not indicative of future results. Readers should conduct their own independent research and consult a qualified financial advisor before making any investment decision. Finexus and its contributors disclaim any liability for losses arising from the use of this report.