Correlation Between First Horizon and Truist Financial
Can any of the company-specific risk be diversified away by investing in both First Horizon and Truist Financial 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 First Horizon and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Horizon and Truist Financial, you can compare the effects of market volatilities on First Horizon and Truist Financial 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 First Horizon with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and Truist Financial.
Diversification Opportunities for First Horizon and Truist Financial
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Truist is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and First Horizon 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 First Horizon are associated (or correlated) with Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of First Horizon i.e., First Horizon and Truist Financial go up and down completely randomly.
Pair Corralation between First Horizon and Truist Financial
Assuming the 90 days trading horizon First Horizon is expected to generate 4.09 times less return on investment than Truist Financial. But when comparing it to its historical volatility, First Horizon is 2.22 times less risky than Truist Financial. It trades about 0.07 of its potential returns per unit of risk. Truist Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,102 in Truist Financial on December 11, 2024 and sell it today you would earn a total of 91.00 from holding Truist Financial or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Horizon vs. Truist Financial
Performance |
| Timeline |
| First Horizon |
| Truist Financial |
First Horizon and Truist Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Horizon and Truist Financial
The main advantage of trading using opposite First Horizon and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.| First Horizon vs. First Horizon | First Horizon vs. First Horizon | First Horizon vs. First Horizon | First Horizon vs. Customers Bancorp |
| Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | Truist Financial vs. Truist Financial | Truist Financial vs. MetLife Preferred Stock |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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