Correlation Between Truist Financial and Valley National

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

Diversification Opportunities for Truist Financial and Valley National

0.95

Correlation Coefficient

Truist Financial  Valley National

Almost no diversification

The 3 months correlation between Truist and Valley is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National Bancorp 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 Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and Valley National go up and down completely randomly.

Pair Corralation between Truist Financial and Valley National

Considering the 90-day investment horizon Truist Financial is expected to generate 1.68 times less return on investment than Valley National. But when comparing it to its historical volatility, Truist Financial Corp is 1.24 times less risky than Valley National. It trades about 0.09 of its potential returns per unit of risk. Valley National Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  872.00  in Valley National Bancorp on September 14, 2024 and sell it today you would earn a total of  149.00  from holding Valley National Bancorp or generate 17.09% return on investment over 90 days.

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

Truist Financial Corp  vs.  Valley National Bancorp

Truist Financial Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valley National Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Valley National showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truist Financial and Valley National

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

The idea behind Truist Financial Corp and Valley National Bancorp 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.