Correlation Between Truist Financial and Home BancShares
Can any of the company-specific risk be diversified away by investing in both Truist Financial and Home BancShares 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 Home BancShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and Home BancShares, you can compare the effects of market volatilities on Truist Financial and Home BancShares 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 Home BancShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Home BancShares.
Diversification Opportunities for Truist Financial and Home BancShares
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Truist and Home is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares 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 Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of Truist Financial i.e., Truist Financial and Home BancShares go up and down completely randomly.
Pair Corralation between Truist Financial and Home BancShares
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Home BancShares. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 3.29 times less risky than Home BancShares. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Home BancShares is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,780 in Home BancShares on August 28, 2024 and sell it today you would earn a total of 426.00 from holding Home BancShares or generate 15.32% 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. Home BancShares
Performance |
| Timeline |
| Truist Financial |
| Home BancShares |
Truist Financial and Home BancShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and Home BancShares
The main advantage of trading using opposite Truist Financial and Home BancShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Home BancShares 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 Home BancShares will offset losses from the drop in Home BancShares' long position.| Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | Truist Financial vs. Truist Financial | Truist Financial vs. MetLife Preferred Stock |
| Home BancShares vs. Community West Bancshares | Home BancShares vs. First Financial Northwest | Home BancShares vs. First Northwest Bancorp | Home BancShares vs. First Capital |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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