Correlation Between COSTCO WHOLESALE and PNC FINL

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Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE 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 COSTCO WHOLESALE and PNC FINL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSTCO WHOLESALE CDR and PNC FINL SER, you can compare the effects of market volatilities on COSTCO WHOLESALE 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 COSTCO WHOLESALE with a short position of PNC FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and PNC FINL.

Diversification Opportunities for COSTCO WHOLESALE and PNC FINL

0.74
  Correlation Coefficient

Poor diversification

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

Pair Corralation between COSTCO WHOLESALE and PNC FINL

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 1.56 times less return on investment than PNC FINL. In addition to that, COSTCO WHOLESALE is 1.1 times more volatile than PNC FINL SER. It trades about 0.07 of its total potential returns per unit of risk. PNC FINL SER is currently generating about 0.12 per unit of volatility. If you would invest  13,726  in PNC FINL SER on October 12, 2024 and sell it today you would earn a total of  4,974  from holding PNC FINL SER or generate 36.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

COSTCO WHOLESALE CDR  vs.  PNC FINL SER

 Performance 
       Timeline  
COSTCO WHOLESALE CDR 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
PNC FINL SER 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PNC FINL SER are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PNC FINL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

COSTCO WHOLESALE and PNC FINL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with COSTCO WHOLESALE and PNC FINL

The main advantage of trading using opposite COSTCO WHOLESALE and PNC FINL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 Stocks Directory module to find actively traded stocks across global markets.

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