Correlation Between Truist Financial and National Bankshares

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

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

Diversification Opportunities for Truist Financial and National Bankshares

0.0

Correlation Coefficient

Truist Financial  National Bankshares

Pay attention - limited upside

The 3 months correlation between Truist and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Truist Financial i.e., Truist Financial and National Bankshares go up and down completely randomly.

Pair Corralation between Truist Financial and National Bankshares

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.5 times more return on investment than National Bankshares. However, Truist Financial is 1.99 times less risky than National Bankshares. It trades about 0.07 of its potential returns per unit of risk. National Bankshares is currently generating about -0.04 per unit of risk. If you would invest  2,078  in Truist Financial on December 30, 2024 and sell it today you would earn a total of  77.00  from holding Truist Financial or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Truist Financial  vs.  National Bankshares

Truist Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 5 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

National Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, National Bankshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Truist Financial and National Bankshares

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

The idea behind Truist Financial and National Bankshares 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 Commodity Directory module to find actively traded commodities issued by global exchanges.