Correlation Between Truist Financial and Heritage Commerce

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

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

Diversification Opportunities for Truist Financial and Heritage Commerce

0.37

Correlation Coefficient

Truist Financial  Heritage Commerce

Weak diversification

The 3 months correlation between Truist and Heritage is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp 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 Corp are associated (or correlated) with Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of Truist Financial i.e., Truist Financial and Heritage Commerce go up and down completely randomly.

Pair Corralation between Truist Financial and Heritage Commerce

Considering the 90-day investment horizon Truist Financial Corp is expected to under-perform the Heritage Commerce. In addition to that, Truist Financial is 1.1 times more volatile than Heritage Commerce Corp. It trades about -0.05 of its total potential returns per unit of risk. Heritage Commerce Corp is currently generating about 0.04 per unit of volatility. If you would invest  925.00  in Heritage Commerce Corp on December 29, 2024 and sell it today you would earn a total of  29.00  from holding Heritage Commerce Corp or generate 3.14% return on investment over 90 days.

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

Truist Financial Corp  vs.  Heritage Commerce Corp

Truist Financial Corp

Risk-Adjusted Performance

Very Weak

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

Heritage Commerce Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Commerce Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Heritage Commerce is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Truist Financial and Heritage Commerce

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

The idea behind Truist Financial Corp and Heritage Commerce Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.