Correlation Between Truist Financial and Ponce Financial

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

Diversification Opportunities for Truist Financial and Ponce Financial

-0.49

Correlation Coefficient

Truist Financial  Ponce Financial

Very good diversification

The 3 months correlation between Truist and Ponce is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Ponce Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ponce Financial Group 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 Ponce Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ponce Financial Group has no effect on the direction of Truist Financial i.e., Truist Financial and Ponce Financial go up and down completely randomly.

Pair Corralation between Truist Financial and Ponce Financial

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.33 times more return on investment than Ponce Financial. However, Truist Financial is 1.33 times more volatile than Ponce Financial Group. It trades about 0.23 of its potential returns per unit of risk. Ponce Financial Group is currently generating about 0.21 per unit of risk. If you would invest  1,940  in Truist Financial on October 25, 2024 and sell it today you would earn a total of  129.00  from holding Truist Financial or generate 6.65% 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.  Ponce Financial Group

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.

Ponce Financial Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ponce Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Ponce Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and Ponce Financial

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

The idea behind Truist Financial and Ponce Financial Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.