Correlation Between Truist Financial and PNC Financial

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

Diversification Opportunities for Truist Financial and PNC Financial

0.86

Correlation Coefficient

Truist Financial  PNC Financial

Very poor diversification

The 3 months correlation between Truist and PNC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial Services has no effect on the direction of Truist Financial i.e., Truist Financial and PNC Financial go up and down completely randomly.

Pair Corralation between Truist Financial and PNC Financial

Considering the 90-day investment horizon Truist Financial Corp is expected to generate 1.14 times more return on investment than PNC Financial. However, Truist Financial is 1.14 times more volatile than PNC Financial Services. It trades about -0.02 of its potential returns per unit of risk. PNC Financial Services is currently generating about -0.09 per unit of risk. If you would invest  4,318  in Truist Financial Corp on December 27, 2024 and sell it today you would lose (120.00) from holding Truist Financial Corp or give up 2.78% of portfolio value over 90 days.

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

Truist Financial Corp  vs.  PNC Financial Services

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.

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Truist Financial and PNC Financial

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

The idea behind Truist Financial Corp and PNC Financial Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.