Correlation Between Truist Financial and Horizon Bancorp

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

Diversification Opportunities for Truist Financial and Horizon Bancorp

0.67

Correlation Coefficient

Truist Financial  Horizon Bancorp

Poor diversification

The 3 months correlation between Truist and Horizon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Horizon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon 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 Horizon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Horizon Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and Horizon Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.59 times more return on investment than Horizon Bancorp. However, Truist Financial is 1.7 times less risky than Horizon Bancorp. It trades about 0.06 of its potential returns per unit of risk. Horizon Bancorp is currently generating about -0.04 per unit of risk. If you would invest  1,884  in Truist Financial on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Truist Financial or generate 3.87% return on investment over 90 days.

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

Truist Financial  vs.  Horizon Bancorp

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. 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.

Horizon Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Truist Financial and Horizon Bancorp

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

The idea behind Truist Financial and Horizon 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.