Correlation Between Truist Financial and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Truist Financial and First 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 First 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 First Bancorp, you can compare the effects of market volatilities on Truist Financial and First 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and First Bancorp.
Diversification Opportunities for Truist Financial and First Bancorp
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Truist and First is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and First Bancorp go up and down completely randomly.
Pair Corralation between Truist Financial and First Bancorp
Assuming the 90 days trading horizon Truist Financial is expected to generate 0.58 times more return on investment than First Bancorp. However, Truist Financial is 1.71 times less risky than First Bancorp. It trades about 0.03 of its potential returns per unit of risk. First Bancorp is currently generating about 0.02 per unit of risk. If you would invest 1,779 in Truist Financial on August 27, 2024 and sell it today you would earn a total of 288.00 from holding Truist Financial or generate 16.19% 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. First Bancorp
Performance |
| Timeline |
| Truist Financial |
| First Bancorp |
Truist Financial and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and First Bancorp
The main advantage of trading using opposite Truist Financial and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Truist Financial vs. Truist Financial | Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | Truist Financial vs. MetLife Preferred Stock |
| First Bancorp vs. LINKBANCORP | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. FS Bancorp | First Bancorp vs. Finward 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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