Correlation Between Truist Financial and TriCo Bancshares

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

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

Diversification Opportunities for Truist Financial and TriCo Bancshares

-0.56

Correlation Coefficient

Truist Financial  TriCo Bancshares

Excellent diversification

The 3 months correlation between Truist and TriCo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares 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 TriCo Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriCo Bancshares has no effect on the direction of Truist Financial i.e., Truist Financial and TriCo Bancshares go up and down completely randomly.

Pair Corralation between Truist Financial and TriCo Bancshares

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.52 times more return on investment than TriCo Bancshares. However, Truist Financial is 1.94 times less risky than TriCo Bancshares. It trades about 0.03 of its potential returns per unit of risk. TriCo Bancshares is currently generating about 0.02 per unit of risk. If you would invest  1,746  in Truist Financial on September 5, 2024 and sell it today you would earn a total of  295.00  from holding Truist Financial or generate 16.9% 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.  TriCo Bancshares

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

TriCo Bancshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TriCo Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, TriCo Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Truist Financial and TriCo Bancshares

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

The idea behind Truist Financial and TriCo Bancshares 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.