Correlation Between PNC Technologies and GS Engineering

Can any of the company-specific risk be diversified away by investing in both PNC Technologies and GS Engineering 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 PNC Technologies and GS Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PNC Technologies co and GS Engineering Construction, you can compare the effects of market volatilities on PNC Technologies and GS Engineering 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 PNC Technologies with a short position of GS Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Technologies and GS Engineering.

Diversification Opportunities for PNC Technologies and GS Engineering

0.05

Correlation Coefficient

PNC Technologies  GS Engineering

Significant diversification

The 3 months correlation between PNC and 006360 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PNC Technologies co and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const and PNC Technologies 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 PNC Technologies co are associated (or correlated) with GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of PNC Technologies i.e., PNC Technologies and GS Engineering go up and down completely randomly.

Pair Corralation between PNC Technologies and GS Engineering

Assuming the 90 days trading horizon PNC Technologies co is expected to under-perform the GS Engineering. But the stock apears to be less risky and, when comparing its historical volatility, PNC Technologies co is 1.05 times less risky than GS Engineering. The stock trades about -0.07 of its potential returns per unit of risk. The GS Engineering Construction is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,825,000  in GS Engineering Construction on September 22, 2024 and sell it today you would lose (45,000) from holding GS Engineering Construction or give up 2.47% of portfolio value over 90 days.

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

PNC Technologies co  vs.  GS Engineering Construction

PNC Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Technologies co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GS Engineering Const

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PNC Technologies and GS Engineering

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

The idea behind PNC Technologies co and GS Engineering Construction 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.