Correlation Between Truist Financial and Stock Yards

Can any of the company-specific risk be diversified away by investing in both Truist Financial and Stock Yards 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 Truist Financial and Stock Yards into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Truist Financial and Stock Yards Bancorp, you can compare the effects of market volatilities on Truist Financial and Stock Yards 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 Truist Financial with a short position of Stock Yards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Stock Yards.

Diversification Opportunities for Truist Financial and Stock Yards

-0.66

Correlation Coefficient

Truist Financial  Stock Yards

Excellent diversification

The 3 months correlation between Truist and Stock is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Stock Yards Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stock Yards Bancorp and Truist 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 Truist Financial are associated (or correlated) with Stock Yards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stock Yards Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Stock Yards go up and down completely randomly.

Pair Corralation between Truist Financial and Stock Yards

Assuming the 90 days trading horizon Truist Financial is expected to generate 7.85 times less return on investment than Stock Yards. But when comparing it to its historical volatility, Truist Financial is 2.03 times less risky than Stock Yards. It trades about 0.01 of its potential returns per unit of risk. Stock Yards Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,955  in Stock Yards Bancorp on September 28, 2024 and sell it today you would earn a total of  1,214  from holding Stock Yards Bancorp or generate 20.39% return on investment over 90 days.

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

Truist Financial  vs.  Stock Yards Bancorp

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Preferred Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Stock Yards Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Yards Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Stock Yards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and Stock Yards

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

The idea behind Truist Financial and Stock Yards 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.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.