Correlation Between Truist Financial and Community Bank
Can any of the company-specific risk be diversified away by investing in both Truist Financial and Community 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 Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and Community Bank System, you can compare the effects of market volatilities on Truist Financial and Community 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 Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Community Bank.
Diversification Opportunities for Truist Financial and Community Bank
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Truist and Community is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of Truist Financial i.e., Truist Financial and Community Bank go up and down completely randomly.
Pair Corralation between Truist Financial and Community Bank
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Community Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 3.53 times less risky than Community Bank. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Community Bank System is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6,100 in Community Bank System on August 28, 2024 and sell it today you would earn a total of 906.00 from holding Community Bank System or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Truist Financial vs. Community Bank System
Performance |
| Timeline |
| Truist Financial |
| Community Bank System |
Truist Financial and Community Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and Community Bank
The main advantage of trading using opposite Truist Financial and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Community 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 Community Bank will offset losses from the drop in Community Bank's long position.| Truist Financial vs. Morgan Stanley | Truist Financial vs. KeyCorp | Truist Financial vs. KeyCorp | Truist Financial vs. KeyCorp |
| Community Bank vs. Fifth Third Bancorp | Community Bank vs. Huntington Bancshares Incorporated | Community Bank vs. MT Bank |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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