Correlation Between Fifth Third and Truist Financial
Can any of the company-specific risk be diversified away by investing in both Fifth Third 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 Fifth Third and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Truist Financial, you can compare the effects of market volatilities on Fifth Third 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 Fifth Third with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Truist Financial.
Diversification Opportunities for Fifth Third and Truist Financial
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fifth and Truist is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and Truist Financial go up and down completely randomly.
Pair Corralation between Fifth Third and Truist Financial
Assuming the 90 days horizon Fifth Third is expected to generate 1.5 times less return on investment than Truist Financial. But when comparing it to its historical volatility, Fifth Third Bancorp is 3.25 times less risky than Truist Financial. It trades about 0.1 of its potential returns per unit of risk. Truist Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,082 in Truist Financial on September 1, 2024 and sell it today you would earn a total of 23.00 from holding Truist Financial or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Truist Financial
Performance |
| Timeline |
| Fifth Third Bancorp |
| Truist Financial |
Fifth Third and Truist Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Truist Financial
The main advantage of trading using opposite Fifth Third and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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.| Fifth Third vs. KeyCorp | Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. US Bancorp |
| Truist Financial vs. Fifth Third Bancorp | Truist Financial vs. Fifth Third Bancorp | Truist Financial vs. First Citizens BancShares | Truist Financial vs. Huntington Bancshares Incorporated |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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