Correlation Between Truist Financial and FS Bancorp

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

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

Diversification Opportunities for Truist Financial and FS Bancorp

0.72

Correlation Coefficient

Truist Financial  FS Bancorp

Poor diversification

The 3 months correlation between Truist and FSBW is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS 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 are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of Truist Financial i.e., Truist Financial and FS Bancorp go up and down completely randomly.

Pair Corralation between Truist Financial and FS Bancorp

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.41 times more return on investment than FS Bancorp. However, Truist Financial is 2.44 times less risky than FS Bancorp. It trades about 0.13 of its potential returns per unit of risk. FS Bancorp is currently generating about -0.04 per unit of risk. If you would invest  2,065  in Truist Financial on May 4, 2025 and sell it today you would earn a total of  106.00  from holding Truist Financial or generate 5.13% return on investment over 90 days.

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

Truist Financial  vs.  FS Bancorp

Truist Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

FS Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, FS Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Truist Financial and FS Bancorp

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

The idea behind Truist Financial and FS 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.