Correlation Between First Capital and Truist Financial

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

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

Diversification Opportunities for First Capital and Truist Financial

-0.62

Correlation Coefficient

First Capital  Truist Financial

Excellent diversification

The 3 months correlation between First and Truist is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Truist Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial Corp and First Capital 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 First Capital 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 Corp has no effect on the direction of First Capital i.e., First Capital and Truist Financial go up and down completely randomly.

Pair Corralation between First Capital and Truist Financial

Given the investment horizon of 90 days First Capital is expected to generate 1.71 times more return on investment than Truist Financial. However, First Capital is 1.71 times more volatile than Truist Financial Corp. It trades about -0.16 of its potential returns per unit of risk. Truist Financial Corp is currently generating about -0.36 per unit of risk. If you would invest  3,247  in First Capital on September 23, 2024 and sell it today you would lose (250.00) from holding First Capital or give up 7.7% of portfolio value over 90 days.

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

First Capital  vs.  Truist Financial Corp

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Truist Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Capital and Truist Financial

The main advantage of trading using opposite First Capital and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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 First Capital and Truist 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.