Correlation Between Microsoft and Truist Financial
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Truist Financial, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Truist Financial.
Diversification Opportunities for Microsoft and Truist Financial
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Truist is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Truist Financial go up and down completely randomly.
Pair Corralation between Microsoft and Truist Financial
Given the investment horizon of 90 days Microsoft is expected to under-perform the Truist Financial. In addition to that, Microsoft is 1.55 times more volatile than Truist Financial. It trades about -0.05 of its total potential returns per unit of risk. Truist Financial is currently generating about -0.07 per unit of volatility. If you would invest 2,104 in Truist Financial on August 27, 2024 and sell it today you would lose (37.00) from holding Truist Financial or give up 1.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Truist Financial
Performance |
| Timeline |
| Microsoft |
| Truist Financial |
Microsoft and Truist Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Truist Financial
The main advantage of trading using opposite Microsoft and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Truist Financial vs. Truist Financial | Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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