Correlation Between Truist Financial and RenaissanceRe Holdings

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

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

Diversification Opportunities for Truist Financial and RenaissanceRe Holdings

0.94

Correlation Coefficient

Truist Financial  RenaissanceRe Holdings

Almost no diversification

The 3 months correlation between Truist and RenaissanceRe is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Truist Financial i.e., Truist Financial and RenaissanceRe Holdings go up and down completely randomly.

Pair Corralation between Truist Financial and RenaissanceRe Holdings

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the RenaissanceRe Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 1.09 times less risky than RenaissanceRe Holdings. The preferred stock trades about -0.31 of its potential returns per unit of risk. The RenaissanceRe Holdings is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,783  in RenaissanceRe Holdings on September 28, 2024 and sell it today you would lose (105.00) from holding RenaissanceRe Holdings or give up 5.89% of portfolio value over 90 days.

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

Truist Financial  vs.  RenaissanceRe Holdings

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Preferred Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RenaissanceRe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RenaissanceRe Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Truist Financial and RenaissanceRe Holdings

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

The idea behind Truist Financial and RenaissanceRe Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.