Correlation Between Axos Financial and Truist Financial

Can any of the company-specific risk be diversified away by investing in both Axos Financial and Truist Financial 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 Axos Financial and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axos Financial and Truist Financial Corp, you can compare the effects of market volatilities on Axos Financial and Truist Financial 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 Axos Financial with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and Truist Financial.

Diversification Opportunities for Axos Financial and Truist Financial

0.36

Correlation Coefficient

Axos Financial  Truist Financial

Weak diversification

The 3 months correlation between Axos and Truist is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Truist Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial Corp and Axos 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 Axos Financial are associated (or correlated) with Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial Corp has no effect on the direction of Axos Financial i.e., Axos Financial and Truist Financial go up and down completely randomly.

Pair Corralation between Axos Financial and Truist Financial

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the Truist Financial. In addition to that, Axos Financial is 1.4 times more volatile than Truist Financial Corp. It trades about -0.27 of its total potential returns per unit of risk. Truist Financial Corp is currently generating about -0.16 per unit of volatility. If you would invest  4,708  in Truist Financial Corp on November 28, 2024 and sell it today you would lose (193.00) from holding Truist Financial Corp or give up 4.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Axos Financial  vs.  Truist Financial Corp

Axos Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Truist Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Axos Financial and Truist Financial

The main advantage of trading using opposite Axos Financial and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axos Financial position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.

The idea behind Axos Financial and Truist Financial Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.