Correlation Between Truist Financial and Red River
Can any of the company-specific risk be diversified away by investing in both Truist Financial and Red River 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 Red River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and Red River Bancshares, you can compare the effects of market volatilities on Truist Financial and Red River 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 Red River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Red River.
Diversification Opportunities for Truist Financial and Red River
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Truist and Red is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Truist Financial i.e., Truist Financial and Red River go up and down completely randomly.
Pair Corralation between Truist Financial and Red River
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Red River. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 1.85 times less risky than Red River. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Red River Bancshares is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,171 in Red River Bancshares on August 24, 2024 and sell it today you would earn a total of 703.00 from holding Red River Bancshares or generate 13.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Truist Financial vs. Red River Bancshares
Performance |
| Timeline |
| Truist Financial |
| Red River Bancshares |
Truist Financial and Red River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and Red River
The main advantage of trading using opposite Truist Financial and Red River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Red River 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 Red River will offset losses from the drop in Red River's long position.| Truist Financial vs. Truist Financial | Truist Financial vs. Truist Financial | Truist Financial vs. US Bancorp | Truist Financial vs. MetLife Preferred Stock |
| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stocks Directory Find actively traded stocks across global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |