Correlation Between Truist Financial and Timberland Bancorp

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Can any of the company-specific risk be diversified away by investing in both Truist Financial and Timberland 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 Timberland 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 Timberland Bancorp, you can compare the effects of market volatilities on Truist Financial and Timberland 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 Timberland Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Timberland Bancorp.

Diversification Opportunities for Truist Financial and Timberland Bancorp

-0.39
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Truist Financial and Timberland Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 15.66 times less return on investment than Timberland Bancorp. But when comparing it to its historical volatility, Truist Financial is 2.87 times less risky than Timberland Bancorp. It trades about 0.04 of its potential returns per unit of risk. Timberland Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,866  in Timberland Bancorp on September 1, 2024 and sell it today you would earn a total of  373.00  from holding Timberland Bancorp or generate 13.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Truist Financial  vs.  Timberland Bancorp

 Performance 
       Timeline  
Truist Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Timberland Bancorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Timberland Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental drivers, Timberland Bancorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Truist Financial and Timberland Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Truist Financial and Timberland Bancorp

The main advantage of trading using opposite Truist Financial and Timberland Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Timberland 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 Timberland Bancorp will offset losses from the drop in Timberland Bancorp's long position.
The idea behind Truist Financial and Timberland 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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