Correlation Between FMC and Truist Financial

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

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

Diversification Opportunities for FMC and Truist Financial

-0.57

Correlation Coefficient

FMC  Truist Financial

Excellent diversification

The 3 months correlation between FMC and Truist is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and FMC 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 FMC Corporation 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 FMC i.e., FMC and Truist Financial go up and down completely randomly.

Pair Corralation between FMC and Truist Financial

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Truist Financial. In addition to that, FMC is 1.09 times more volatile than Truist Financial. It trades about -0.06 of its total potential returns per unit of risk. Truist Financial is currently generating about 0.01 per unit of volatility. If you would invest  4,040  in Truist Financial on October 5, 2024 and sell it today you would earn a total of  144.00  from holding Truist Financial or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.17%
Values	Daily Returns

FMC Corp.  vs.  Truist Financial

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Truist Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FMC and Truist Financial

The main advantage of trading using opposite FMC and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.