Correlation Between Truist Financial and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both Truist Financial and US 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and US Bancorp, you can compare the effects of market volatilities on Truist Financial and US 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and US Bancorp.

Diversification Opportunities for Truist Financial and US Bancorp

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Truist and USB-PR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US 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 are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and US Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and US Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.51 times more return on investment than US Bancorp. However, Truist Financial is 1.96 times less risky than US Bancorp. It trades about 0.24 of its potential returns per unit of risk. US Bancorp is currently generating about -0.13 per unit of risk. If you would invest  2,328  in Truist Financial on August 28, 2024 and sell it today you would earn a total of  75.00  from holding Truist Financial or generate 3.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Truist Financial  vs.  US Bancorp

 Performance 
       Timeline  
Truist Financial 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
US Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Truist Financial and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Truist Financial and US Bancorp

The main advantage of trading using opposite Truist Financial and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
The idea behind Truist Financial and US 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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