Correlation Between Truist Financial and City Holding

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

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

Diversification Opportunities for Truist Financial and City Holding

-0.52

Correlation Coefficient

Truist Financial  City Holding

Excellent diversification

The 3 months correlation between Truist and City is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and City Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Holding 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 City Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Holding has no effect on the direction of Truist Financial i.e., Truist Financial and City Holding go up and down completely randomly.

Pair Corralation between Truist Financial and City Holding

Assuming the 90 days trading horizon Truist Financial is expected to generate 14.92 times less return on investment than City Holding. But when comparing it to its historical volatility, Truist Financial is 2.18 times less risky than City Holding. It trades about 0.01 of its potential returns per unit of risk. City Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,852  in City Holding on September 3, 2024 and sell it today you would earn a total of  1,280  from holding City Holding or generate 10.8% return on investment over 90 days.

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

Truist Financial  vs.  City Holding

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 relatively invariable fundamental indicators, Truist Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

City Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, City Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Truist Financial and City Holding

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

The idea behind Truist Financial and City Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.