Correlation Between Columbia Financial and PNC Financial

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

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

Diversification Opportunities for Columbia Financial and PNC Financial

0.74

Correlation Coefficient

Columbia Financial  PNC Financial

Poor diversification

The 3 months correlation between Columbia and PNC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Financial and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services and Columbia 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 Columbia Financial 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 Services has no effect on the direction of Columbia Financial i.e., Columbia Financial and PNC Financial go up and down completely randomly.

Pair Corralation between Columbia Financial and PNC Financial

Given the investment horizon of 90 days Columbia Financial is expected to under-perform the PNC Financial. In addition to that, Columbia Financial is 1.17 times more volatile than PNC Financial Services. It trades about -0.42 of its total potential returns per unit of risk. PNC Financial Services is currently generating about -0.28 per unit of volatility. If you would invest  20,863  in PNC Financial Services on October 7, 2024 and sell it today you would lose (1,300) from holding PNC Financial Services or give up 6.23% of portfolio value over 90 days.

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

Columbia Financial  vs.  PNC Financial Services

Columbia Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Columbia Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PNC Financial Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Columbia Financial and PNC Financial

The main advantage of trading using opposite Columbia Financial and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Financial 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 Columbia Financial and PNC Financial Services 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.