Correlation Between Truist Financial and Catalyst Bancorp

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

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

Diversification Opportunities for Truist Financial and Catalyst Bancorp

0.04

Correlation Coefficient

Truist Financial  Catalyst Bancorp

Significant diversification

The 3 months correlation between Truist and Catalyst is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Catalyst Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Bancorp 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 Catalyst Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Catalyst Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and Catalyst Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.95 times more return on investment than Catalyst Bancorp. However, Truist Financial is 1.05 times less risky than Catalyst Bancorp. It trades about 0.02 of its potential returns per unit of risk. Catalyst Bancorp is currently generating about -0.02 per unit of risk. If you would invest  2,227  in Truist Financial on December 3, 2024 and sell it today you would earn a total of  25.00  from holding Truist Financial or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Truist Financial  vs.  Catalyst Bancorp

Truist Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Catalyst Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Catalyst Bancorp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Truist Financial and Catalyst Bancorp

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

The idea behind Truist Financial and Catalyst Bancorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.