Correlation Between Truist Financial and Bancorp

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Can any of the company-specific risk be diversified away by investing in both Truist Financial and 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 Truist Financial and Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and The Bancorp, you can compare the effects of market volatilities on Truist Financial and 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 Truist Financial with a short position of Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Bancorp.

Diversification Opportunities for Truist Financial and Bancorp

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Truist and Bancorp is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and The Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Bancorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 4.19 times less risky than Bancorp. The preferred stock trades about -0.06 of its potential returns per unit of risk. The The Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,904  in The Bancorp on September 6, 2024 and sell it today you would earn a total of  875.00  from holding The Bancorp or generate 17.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Truist Financial  vs.  The Bancorp

 Performance 
       Timeline  
Truist Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Bancorp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in The Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Truist Financial and Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Truist Financial and Bancorp

The main advantage of trading using opposite Truist Financial and Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, 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 Bancorp will offset losses from the drop in Bancorp's long position.
The idea behind Truist Financial and The 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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