Correlation Between Truist Financial and FB Financial
Can any of the company-specific risk be diversified away by investing in both Truist Financial and FB 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 Truist Financial and FB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and FB Financial Corp, you can compare the effects of market volatilities on Truist Financial and FB 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 Truist Financial with a short position of FB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and FB Financial.
Diversification Opportunities for Truist Financial and FB Financial
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Truist and FBK is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Truist Financial i.e., Truist Financial and FB Financial go up and down completely randomly.
Pair Corralation between Truist Financial and FB Financial
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the FB Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 3.78 times less risky than FB Financial. The preferred stock trades about -0.09 of its potential returns per unit of risk. The FB Financial Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,976 in FB Financial Corp on August 30, 2024 and sell it today you would earn a total of 655.00 from holding FB Financial Corp or generate 13.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Truist Financial vs. FB Financial Corp
Performance |
| Timeline |
| Truist Financial |
| FB Financial Corp |
Truist Financial and FB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and FB Financial
The main advantage of trading using opposite Truist Financial and FB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, FB 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 FB Financial will offset losses from the drop in FB Financial's long position.The idea behind Truist Financial and FB Financial Corp 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.| FB Financial vs. Home Bancorp | FB Financial vs. First Business Financial | FB Financial vs. LINKBANCORP | FB Financial vs. Great Southern Bancorp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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