Correlation Between Amazon and PNC FINL

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

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

Diversification Opportunities for Amazon and PNC FINL

0.74

Correlation Coefficient

Amazon  PNC FINL

Poor diversification

The 3 months correlation between Amazon and PNC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and PNC FINL go up and down completely randomly.

Pair Corralation between Amazon and PNC FINL

Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.02 times more return on investment than PNC FINL. However, Amazon is 1.02 times more volatile than PNC FINL SER. It trades about 0.28 of its potential returns per unit of risk. PNC FINL SER is currently generating about 0.16 per unit of risk. If you would invest  16,926  in Amazon Inc on October 9, 2024 and sell it today you would earn a total of  4,949  from holding Amazon Inc or generate 29.24% return on investment over 90 days.

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

Amazon Inc  vs.  PNC FINL SER

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

PNC FINL SER

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PNC FINL SER are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PNC FINL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and PNC FINL

The main advantage of trading using opposite Amazon and PNC FINL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.