Correlation Between Byline Bancorp and Truist Financial

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

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

Diversification Opportunities for Byline Bancorp and Truist Financial

0.28

Correlation Coefficient

Byline Bancorp  Truist Financial

Modest diversification

The 3 months correlation between Byline and Truist is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Byline Bancorp 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 Byline Bancorp are associated (or correlated) with Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and Truist Financial go up and down completely randomly.

Pair Corralation between Byline Bancorp and Truist Financial

Allowing for the 90-day total investment horizon Byline Bancorp is expected to under-perform the Truist Financial. In addition to that, Byline Bancorp is 2.4 times more volatile than Truist Financial. It trades about -0.31 of its total potential returns per unit of risk. Truist Financial is currently generating about -0.34 per unit of volatility. If you would invest  2,403  in Truist Financial on September 24, 2024 and sell it today you would lose (97.00) from holding Truist Financial or give up 4.04% of portfolio value over 90 days.

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

Byline Bancorp  vs.  Truist Financial

Byline Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Byline Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Byline Bancorp and Truist Financial

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

The idea behind Byline Bancorp and Truist Financial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.