Correlation Between Truist Financial and Regions Financial

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

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

Diversification Opportunities for Truist Financial and Regions Financial

0.33

Correlation Coefficient

Truist Financial  Regions Financial

Weak diversification

The 3 months correlation between Truist and Regions is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of Truist Financial i.e., Truist Financial and Regions Financial go up and down completely randomly.

Pair Corralation between Truist Financial and Regions Financial

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.44 times less return on investment than Regions Financial. But when comparing it to its historical volatility, Truist Financial is 1.24 times less risky than Regions Financial. It trades about 0.03 of its potential returns per unit of risk. Regions Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,004  in Regions Financial on September 20, 2024 and sell it today you would earn a total of  415.00  from holding Regions Financial or generate 20.71% return on investment over 90 days.

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

Truist Financial  vs.  Regions Financial

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.

Regions Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Regions Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Truist Financial and Regions Financial

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

The idea behind Truist Financial and Regions Financial 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 CEOs Directory module to screen CEOs from public companies around the world.