Correlation Between Truist Financial and Align Technology

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

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

Diversification Opportunities for Truist Financial and Align Technology

0.1

Correlation Coefficient

Truist Financial  Align Technology

Average diversification

The 3 months correlation between Truist and Align is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Truist Financial i.e., Truist Financial and Align Technology go up and down completely randomly.

Pair Corralation between Truist Financial and Align Technology

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.04 times more return on investment than Align Technology. However, Truist Financial is 1.04 times more volatile than Align Technology. It trades about -0.08 of its potential returns per unit of risk. Align Technology is currently generating about -0.24 per unit of risk. If you would invest  25,985  in Truist Financial on December 24, 2024 and sell it today you would lose (2,548) from holding Truist Financial or give up 9.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Truist Financial  vs.  Align Technology

Truist Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Truist Financial and Align Technology

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

The idea behind Truist Financial and Align Technology 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.