Correlation Between MT Bank and Truist Financial

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

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

Diversification Opportunities for MT Bank and Truist Financial

0.21

Correlation Coefficient

MT Bank  Truist Financial

Modest diversification

The 3 months correlation between MTB-PH and Truist is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and MT Bank 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 MT Bank 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 MT Bank i.e., MT Bank and Truist Financial go up and down completely randomly.

Pair Corralation between MT Bank and Truist Financial

Assuming the 90 days trading horizon MT Bank is expected to generate 1.07 times more return on investment than Truist Financial. However, MT Bank is 1.07 times more volatile than Truist Financial. It trades about -0.03 of its potential returns per unit of risk. Truist Financial is currently generating about -0.25 per unit of risk. If you would invest  2,463  in MT Bank on September 20, 2024 and sell it today you would lose (19.00) from holding MT Bank or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

MT Bank  vs.  Truist Financial

MT Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of latest weak performance, the Preferred Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MT Bank and Truist Financial

The main advantage of trading using opposite MT Bank and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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 MT Bank 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.