Correlation Between Meta Financial and Truist Financial

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

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

Diversification Opportunities for Meta Financial and Truist Financial

0.72

Correlation Coefficient

Meta Financial  Truist Financial

Poor diversification

The 3 months correlation between Meta and Truist is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Meta Financial Group and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Meta 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 Meta Financial Group 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 Meta Financial i.e., Meta Financial and Truist Financial go up and down completely randomly.

Pair Corralation between Meta Financial and Truist Financial

Assuming the 90 days horizon Meta Financial Group is expected to generate 0.86 times more return on investment than Truist Financial. However, Meta Financial Group is 1.16 times less risky than Truist Financial. It trades about -0.08 of its potential returns per unit of risk. Truist Financial is currently generating about -0.07 per unit of risk. If you would invest  7,150  in Meta Financial Group on December 11, 2024 and sell it today you would lose (450.00) from holding Meta Financial Group or give up 6.29% of portfolio value over 90 days.

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

Meta Financial Group  vs.  Truist Financial

Meta Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Truist Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Meta Financial and Truist Financial

The main advantage of trading using opposite Meta Financial and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Financial 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 Meta Financial Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.