Correlation Between Truist Financial and MT Bank

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

Diversification Opportunities for Truist Financial and MT Bank

0.21

Correlation Coefficient

Truist Financial  MT Bank

Modest diversification

The 3 months correlation between Truist and MTB-PH is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of Truist Financial i.e., Truist Financial and MT Bank go up and down completely randomly.

Pair Corralation between Truist Financial and MT Bank

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.34 times less return on investment than MT Bank. In addition to that, Truist Financial is 1.23 times more volatile than MT Bank. It trades about 0.02 of its total potential returns per unit of risk. MT Bank is currently generating about 0.03 per unit of volatility. If you would invest  2,350  in MT Bank on September 20, 2024 and sell it today you would earn a total of  94.00  from holding MT Bank or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Truist Financial  vs.  MT 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.

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.

Pair Trading with Truist Financial and MT Bank

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

The idea behind Truist Financial and MT 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.