Correlation Between Truist Financial and Schlumberger

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

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

Diversification Opportunities for Truist Financial and Schlumberger

0.39

Correlation Coefficient

Truist Financial  Schlumberger

Weak diversification

The 3 months correlation between Truist and Schlumberger is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of Truist Financial i.e., Truist Financial and Schlumberger go up and down completely randomly.

Pair Corralation between Truist Financial and Schlumberger

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.71 times more return on investment than Schlumberger. However, Truist Financial is 1.42 times less risky than Schlumberger. It trades about 0.16 of its potential returns per unit of risk. Schlumberger Limited is currently generating about 0.08 per unit of risk. If you would invest  24,458  in Truist Financial on October 23, 2024 and sell it today you would earn a total of  3,595  from holding Truist Financial or generate 14.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Truist Financial  vs.  Schlumberger Limited

Truist Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 12 (%) 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.

Schlumberger Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Schlumberger may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Truist Financial and Schlumberger

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

The idea behind Truist Financial and Schlumberger Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.