Correlation Between Truist Financial and PCB Bancorp

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

Diversification Opportunities for Truist Financial and PCB Bancorp

-0.12

Correlation Coefficient

Truist Financial  PCB Bancorp

Good diversification

The 3 months correlation between Truist and PCB is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and PCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB 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 PCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and PCB Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and PCB Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.58 times more return on investment than PCB Bancorp. However, Truist Financial is 1.72 times less risky than PCB Bancorp. It trades about 0.09 of its potential returns per unit of risk. PCB Bancorp is currently generating about -0.04 per unit of risk. If you would invest  2,078  in Truist Financial on December 28, 2024 and sell it today you would earn a total of  104.00  from holding Truist Financial or generate 5.0% return on investment over 90 days.

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

Truist Financial  vs.  PCB Bancorp

Truist Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 7 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

PCB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, PCB Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Truist Financial and PCB Bancorp

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

The idea behind Truist Financial and PCB 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..