Correlation Between Truist Financial and Invesco SP

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

Diversification Opportunities for Truist Financial and Invesco SP

0.78

Correlation Coefficient

Truist Financial  Invesco SP

Poor diversification

The 3 months correlation between Truist and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of Truist Financial i.e., Truist Financial and Invesco SP go up and down completely randomly.

Pair Corralation between Truist Financial and Invesco SP

Considering the 90-day investment horizon Truist Financial Corp is expected to under-perform the Invesco SP. In addition to that, Truist Financial is 1.84 times more volatile than Invesco SP MidCap. It trades about 0.0 of its total potential returns per unit of risk. Invesco SP MidCap is currently generating about 0.07 per unit of volatility. If you would invest  8,015  in Invesco SP MidCap on February 26, 2024 and sell it today you would earn a total of  3,614  from holding Invesco SP MidCap or generate 45.09% return on investment over 90 days.

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

Truist Financial Corp  vs.  Invesco SP MidCap

Truist Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Invesco SP MidCap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Truist Financial and Invesco SP

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

The idea behind Truist Financial Corp and Invesco SP MidCap 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.