Correlation Between Regions Financial and Truist Financial

Can any of the company-specific risk be diversified away by investing in both Regions 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 Regions 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 Regions Financial and Truist Financial Corp, you can compare the effects of market volatilities on Regions 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 Regions Financial with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and Truist Financial.

Diversification Opportunities for Regions Financial and Truist Financial

0.58

Correlation Coefficient

Regions Financial  Truist Financial

Very weak diversification

The 3 months correlation between Regions and Truist is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial 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 Regions 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Truist Financial go up and down completely randomly.

Pair Corralation between Regions Financial and Truist Financial

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Truist Financial. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.05 times less risky than Truist Financial. The stock trades about -0.16 of its potential returns per unit of risk. The Truist Financial Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,715  in Truist Financial Corp on November 28, 2024 and sell it today you would lose (200.00) from holding Truist Financial Corp or give up 4.24% of portfolio value over 90 days.

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

Regions Financial  vs.  Truist Financial Corp

Regions Financial

Risk-Adjusted Performance

Very Weak

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

Truist Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Regions Financial and Truist Financial

The main advantage of trading using opposite Regions Financial and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions 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 Regions Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.