Correlation Between Truist Financial and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both Truist Financial and Preferred 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 Preferred 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 Preferred Bank, you can compare the effects of market volatilities on Truist Financial and Preferred 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 Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Preferred Bank.
Diversification Opportunities for Truist Financial and Preferred Bank
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Truist and Preferred is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Truist Financial i.e., Truist Financial and Preferred Bank go up and down completely randomly.
Pair Corralation between Truist Financial and Preferred Bank
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Preferred Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 2.76 times less risky than Preferred Bank. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Preferred Bank is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,486 in Preferred Bank on August 30, 2024 and sell it today you would earn a total of 1,084 from holding Preferred Bank or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Truist Financial vs. Preferred Bank
Performance |
| Timeline |
| Truist Financial |
| Preferred Bank |
Truist Financial and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and Preferred Bank
The main advantage of trading using opposite Truist Financial and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Preferred 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| Truist Financial vs. Truist Financial | Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | Truist Financial vs. MetLife Preferred Stock |
| Preferred Bank vs. Pacific Premier Bancorp | Preferred Bank vs. Heritage Financial | Preferred Bank vs. QCR Holdings | Preferred Bank vs. Lakeland Financial |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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