Correlation Between Truist Financial and Natura Co

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

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

Diversification Opportunities for Truist Financial and Natura Co

-0.41

Correlation Coefficient

Truist Financial  Natura Co

Very good diversification

The 3 months correlation between Truist and Natura is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding 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 Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Truist Financial i.e., Truist Financial and Natura Co go up and down completely randomly.

Pair Corralation between Truist Financial and Natura Co

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.57 times more return on investment than Natura Co. However, Truist Financial is 1.77 times less risky than Natura Co. It trades about 0.18 of its potential returns per unit of risk. Natura Co Holding is currently generating about -0.06 per unit of risk. If you would invest  23,980  in Truist Financial on October 22, 2024 and sell it today you would earn a total of  4,073  from holding Truist Financial or generate 16.98% return on investment over 90 days.

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

Truist Financial  vs.  Natura Co Holding

Truist Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Truist Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Truist Financial and Natura Co

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

The idea behind Truist Financial and Natura Co Holding 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.