Correlation Between Truist Financial and Dime Community

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

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

Diversification Opportunities for Truist Financial and Dime Community

-0.34

Correlation Coefficient

Truist Financial  Dime Community

Very good diversification

The 3 months correlation between Truist and Dime is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community 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 Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of Truist Financial i.e., Truist Financial and Dime Community go up and down completely randomly.

Pair Corralation between Truist Financial and Dime Community

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.56 times more return on investment than Dime Community. However, Truist Financial is 1.78 times less risky than Dime Community. It trades about 0.03 of its potential returns per unit of risk. Dime Community Bancshares is currently generating about -0.02 per unit of risk. If you would invest  1,785  in Truist Financial on January 31, 2024 and sell it today you would earn a total of  386.00  from holding Truist Financial or generate 21.62% return on investment over 90 days.

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

Truist Financial  vs.  Dime Community Bancshares

Truist Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Dime Community Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Truist Financial and Dime Community

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

The idea behind Truist Financial and Dime Community 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.