Correlation Between OVERSEA CHINUNSPADR2 and Truist Financial

Can any of the company-specific risk be diversified away by investing in both OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OVERSEA CHINUNSPADR2 and Truist Financial, you can compare the effects of market volatilities on OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of OVERSEA CHINUNSPADR2 and Truist Financial.

Diversification Opportunities for OVERSEA CHINUNSPADR2 and Truist Financial

0.85

Correlation Coefficient

OVERSEA CHINUNSPADR2  Truist Financial

Very poor diversification

The 3 months correlation between OVERSEA and Truist is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding OVERSEA CHINUNSPADR2 and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 i.e., OVERSEA CHINUNSPADR2 and Truist Financial go up and down completely randomly.

Pair Corralation between OVERSEA CHINUNSPADR2 and Truist Financial

Assuming the 90 days trading horizon OVERSEA CHINUNSPADR2 is expected to generate 0.81 times more return on investment than Truist Financial. However, OVERSEA CHINUNSPADR2 is 1.24 times less risky than Truist Financial. It trades about 0.09 of its potential returns per unit of risk. Truist Financial is currently generating about -0.39 per unit of risk. If you would invest  2,300  in OVERSEA CHINUNSPADR2 on September 23, 2024 and sell it today you would earn a total of  40.00  from holding OVERSEA CHINUNSPADR2 or generate 1.74% return on investment over 90 days.

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

OVERSEA CHINUNSPADR2  vs.  Truist Financial

OVERSEA CHINUNSPADR2

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OVERSEA CHINUNSPADR2 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, OVERSEA CHINUNSPADR2 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Truist Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with OVERSEA CHINUNSPADR2 and Truist Financial

The main advantage of trading using opposite OVERSEA CHINUNSPADR2 and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 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.

Check out your portfolio center.

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.