Correlation Between Truist Financial and CVB Financial

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

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

Diversification Opportunities for Truist Financial and CVB Financial

0.94

Correlation Coefficient

Truist Financial  CVB Financial

Almost no diversification

The 3 months correlation between Truist and CVB is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and CVB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial Corp 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial Corp has no effect on the direction of Truist Financial i.e., Truist Financial and CVB Financial go up and down completely randomly.

Pair Corralation between Truist Financial and CVB Financial

Assuming the 90 days horizon Truist Financial is expected to generate 1.73 times less return on investment than CVB Financial. But when comparing it to its historical volatility, Truist Financial is 1.56 times less risky than CVB Financial. It trades about 0.12 of its potential returns per unit of risk. CVB Financial Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,713  in CVB Financial Corp on October 6, 2024 and sell it today you would earn a total of  307.00  from holding CVB Financial Corp or generate 17.92% return on investment over 90 days.

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

Truist Financial  vs.  CVB Financial Corp

Truist Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CVB Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and CVB Financial

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

The idea behind Truist Financial and CVB 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.