Correlation Between Truist Financial and AbbVie

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

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

Diversification Opportunities for Truist Financial and AbbVie

-0.1

Correlation Coefficient

Truist Financial  AbbVie

Good diversification

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

Pair Corralation between Truist Financial and AbbVie

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the AbbVie. In addition to that, Truist Financial is 1.26 times more volatile than AbbVie Inc. It trades about -0.08 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.09 per unit of volatility. If you would invest  6,875  in AbbVie Inc on December 24, 2024 and sell it today you would earn a total of  564.00  from holding AbbVie Inc or generate 8.2% 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.  AbbVie Inc

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.

AbbVie Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, AbbVie may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Truist Financial and AbbVie

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

The idea behind Truist Financial and AbbVie Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.