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
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Truist and PNC is 0.92. 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 1.25 times more return on investment than PNC Financial. However, Truist Financial is 1.25 times more volatile than PNC Financial Services. It trades about 0.05 of its potential returns per unit of risk. PNC Financial Services is currently generating about 0.06 per unit of risk. If you would invest 2,845 in Truist Financial Corp on January 20, 2024 and sell it today you would earn a total of 726.00 from holding Truist Financial Corp or generate 25.52% 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. PNC Financial Services
Performance |
| Timeline |
| Truist Financial Corp |
| PNC Financial Services |
Truist Financial and PNC Financial Volatility Contrast
Predicted Return Density |
| Returns |
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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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