Correlation Between Small Cap and Pnc Balanced

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

By analyzing existing cross correlation between Small Cap Value and Pnc Balanced Allocation, you can compare the effects of market volatilities on Small Cap and Pnc Balanced 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 Small Cap with a short position of Pnc Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pnc Balanced.

Diversification Opportunities for Small Cap and Pnc Balanced

0.84

Correlation Coefficient

Small Cap  Pnc Balanced

Very poor diversification

The 3 months correlation between Small and Pnc is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Pnc Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pnc Balanced Allocation and Small Cap 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 Small Cap Value are associated (or correlated) with Pnc Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pnc Balanced Allocation has no effect on the direction of Small Cap i.e., Small Cap and Pnc Balanced go up and down completely randomly.

Pair Corralation between Small Cap and Pnc Balanced

Assuming the 90 days horizon Small Cap Value is expected to under-perform the Pnc Balanced. In addition to that, Small Cap is 1.78 times more volatile than Pnc Balanced Allocation. It trades about -0.01 of its total potential returns per unit of risk. Pnc Balanced Allocation is currently generating about 0.08 per unit of volatility. If you would invest  1,037  in Pnc Balanced Allocation on October 25, 2024 and sell it today you would earn a total of  300.00  from holding Pnc Balanced Allocation or generate 28.93% return on investment over 90 days.

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

Small Cap Value  vs.  Pnc Balanced Allocation

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pnc Balanced Allocation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pnc Balanced Allocation are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pnc Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Pnc Balanced

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

The idea behind Small Cap Value and Pnc Balanced Allocation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.