Correlation Between Truist Financial and Home Bancorp

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

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

Diversification Opportunities for Truist Financial and Home Bancorp

0.9

Correlation Coefficient

Truist Financial  Home Bancorp

Almost no diversification

The 3 months correlation between Truist and Home is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home 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 Corp are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Home Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and Home Bancorp

Considering the 90-day investment horizon Truist Financial Corp is expected to under-perform the Home Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Truist Financial Corp is 1.23 times less risky than Home Bancorp. The stock trades about -0.09 of its potential returns per unit of risk. The Home Bancorp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,069  in Home Bancorp on September 13, 2024 and sell it today you would lose (35.00) from holding Home Bancorp or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Truist Financial Corp  vs.  Home Bancorp

Truist Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Home Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and Home Bancorp

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

The idea behind Truist Financial Corp and Home 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.