Correlation Between Truist Financial and Capital Bancorp

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

Diversification Opportunities for Truist Financial and Capital Bancorp

-0.65

Correlation Coefficient

Truist Financial  Capital Bancorp

Excellent diversification

The 3 months correlation between Truist and Capital is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital 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 Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Capital Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and Capital Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 9.12 times less return on investment than Capital Bancorp. But when comparing it to its historical volatility, Truist Financial is 1.5 times less risky than Capital Bancorp. It trades about 0.0 of its potential returns per unit of risk. Capital Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,229  in Capital Bancorp on October 12, 2024 and sell it today you would earn a total of  447.00  from holding Capital Bancorp or generate 20.05% return on investment over 90 days.

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

Truist Financial  vs.  Capital Bancorp

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. Even with latest unfluctuating performance, the Preferred Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Capital Bancorp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Truist Financial and Capital Bancorp

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

The idea behind Truist Financial and Capital 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.