Correlation Between CHINA EDUCATION and PNC Financial

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

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

Diversification Opportunities for CHINA EDUCATION and PNC Financial

0.75

Correlation Coefficient

CHINA EDUCATION  PNC Financial

Poor diversification

The 3 months correlation between CHINA and PNC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial and CHINA EDUCATION 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 CHINA EDUCATION GROUP are associated (or correlated) with PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and PNC Financial go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and PNC Financial

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to under-perform the PNC Financial. In addition to that, CHINA EDUCATION is 2.3 times more volatile than The PNC Financial. It trades about -0.12 of its total potential returns per unit of risk. The PNC Financial is currently generating about -0.12 per unit of volatility. If you would invest  18,441  in The PNC Financial on December 27, 2024 and sell it today you would lose (2,241) from holding The PNC Financial or give up 12.15% of portfolio value over 90 days.

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

CHINA EDUCATION GROUP  vs.  The PNC Financial

CHINA EDUCATION GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PNC Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days The PNC Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the 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 CHINA EDUCATION and PNC Financial

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

The idea behind CHINA EDUCATION GROUP and The PNC Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.