Correlation Between Truist Financial and Automatic Data

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

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

Diversification Opportunities for Truist Financial and Automatic Data

-0.06

Correlation Coefficient

Truist Financial  Automatic Data

Good diversification

The 3 months correlation between Truist and Automatic is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Truist Financial i.e., Truist Financial and Automatic Data go up and down completely randomly.

Pair Corralation between Truist Financial and Automatic Data

Assuming the 90 days trading horizon Truist Financial is expected to generate 1.45 times more return on investment than Automatic Data. However, Truist Financial is 1.45 times more volatile than Automatic Data Processing. It trades about 0.08 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.0 per unit of risk. If you would invest  23,113  in Truist Financial on April 25, 2025 and sell it today you would earn a total of  2,407  from holding Truist Financial or generate 10.41% 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.  Automatic Data Processing

Truist Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Truist Financial and Automatic Data

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

The idea behind Truist Financial and Automatic Data Processing 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.