Correlation Between Truist Financial and National Bank

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

Diversification Opportunities for Truist Financial and National Bank

0.9

Correlation Coefficient

Truist Financial  National Bank

Almost no diversification

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

Pair Corralation between Truist Financial and National Bank

Considering the 90-day investment horizon Truist Financial is expected to generate 1.27 times less return on investment than National Bank. But when comparing it to its historical volatility, Truist Financial Corp is 1.32 times less risky than National Bank. It trades about 0.09 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,130  in National Bank Holdings on September 14, 2024 and sell it today you would earn a total of  495.00  from holding National Bank Holdings or generate 11.99% return on investment over 90 days.

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

Truist Financial Corp  vs.  National Bank Holdings

Truist Financial Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

National Bank Holdings

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, National Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and National Bank

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

The idea behind Truist Financial Corp and National Bank Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.