Correlation Between Alfa Financial and PNC FINL

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

By analyzing existing cross correlation between Alfa Financial Software and PNC FINL SER, you can compare the effects of market volatilities on Alfa Financial and PNC FINL 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 Alfa Financial with a short position of PNC FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and PNC FINL.

Diversification Opportunities for Alfa Financial and PNC FINL

-0.33

Correlation Coefficient

Alfa Financial  PNC FINL

Very good diversification

The 3 months correlation between Alfa and PNC is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and PNC FINL SER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC FINL SER and Alfa 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 Alfa Financial Software are associated (or correlated) with PNC FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC FINL SER has no effect on the direction of Alfa Financial i.e., Alfa Financial and PNC FINL go up and down completely randomly.

Pair Corralation between Alfa Financial and PNC FINL

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 1.0 times more return on investment than PNC FINL. However, Alfa Financial Software is 1.0 times less risky than PNC FINL. It trades about 0.04 of its potential returns per unit of risk. PNC FINL SER is currently generating about -0.12 per unit of risk. If you would invest  250.00  in Alfa Financial Software on December 20, 2024 and sell it today you would earn a total of  8.00  from holding Alfa Financial Software or generate 3.2% return on investment over 90 days.

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

Alfa Financial Software  vs.  PNC FINL SER

Alfa Financial Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PNC FINL SER

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC FINL SER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alfa Financial and PNC FINL

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

The idea behind Alfa Financial Software and PNC FINL SER 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.