Correlation Between Truist Financial and Amalgamated Bank

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

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

Diversification Opportunities for Truist Financial and Amalgamated Bank

-0.67

Correlation Coefficient

Truist Financial  Amalgamated Bank

Excellent diversification

The 3 months correlation between Truist and Amalgamated is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Amalgamated Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amalgamated Bank and Truist 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 Truist Financial are associated (or correlated) with Amalgamated Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amalgamated Bank has no effect on the direction of Truist Financial i.e., Truist Financial and Amalgamated Bank go up and down completely randomly.

Pair Corralation between Truist Financial and Amalgamated Bank

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Amalgamated Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 2.91 times less risky than Amalgamated Bank. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Amalgamated Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,169  in Amalgamated Bank on September 16, 2024 and sell it today you would earn a total of  325.00  from holding Amalgamated Bank or generate 10.26% return on investment over 90 days.

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

Truist Financial  vs.  Amalgamated Bank

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.

Amalgamated Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amalgamated Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Amalgamated Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Truist Financial and Amalgamated Bank

The main advantage of trading using opposite Truist Financial and Amalgamated Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, Amalgamated Bank 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 Amalgamated Bank will offset losses from the drop in Amalgamated Bank's long position.

The idea behind Truist Financial and Amalgamated Bank 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.