Correlation Between Truist Financial and Provident Financial

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

Diversification Opportunities for Truist Financial and Provident Financial

-0.87

Correlation Coefficient

Truist Financial  Provident Financial

Pay attention - limited upside

The 3 months correlation between Truist and Provident is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Provident Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident 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 Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Truist Financial i.e., Truist Financial and Provident Financial go up and down completely randomly.

Pair Corralation between Truist Financial and Provident Financial

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Provident Financial. In addition to that, Truist Financial is 1.13 times more volatile than Provident Financial Holdings. It trades about -0.19 of its total potential returns per unit of risk. Provident Financial Holdings is currently generating about 0.19 per unit of volatility. If you would invest  1,578  in Provident Financial Holdings on September 21, 2024 and sell it today you would earn a total of  63.00  from holding Provident Financial Holdings or generate 3.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Truist Financial  vs.  Provident Financial Holdings

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 weak 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.

Provident Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Provident Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and Provident Financial

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

The idea behind Truist Financial and Provident Financial Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.