Correlation Between Pnc International and Federated Municipal

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

By analyzing existing cross correlation between Pnc International Growth and Federated Municipal High, you can compare the effects of market volatilities on Pnc International and Federated Municipal 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 Pnc International with a short position of Federated Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pnc International and Federated Municipal.

Diversification Opportunities for Pnc International and Federated Municipal

0.6

Correlation Coefficient

Pnc International  Federated Municipal

Poor diversification

The 3 months correlation between Pnc and Federated is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pnc International Growth and Federated Municipal High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Municipal High and Pnc International 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 Pnc International Growth are associated (or correlated) with Federated Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Municipal High has no effect on the direction of Pnc International i.e., Pnc International and Federated Municipal go up and down completely randomly.

Pair Corralation between Pnc International and Federated Municipal

Assuming the 90 days horizon Pnc International Growth is expected to generate 5.27 times more return on investment than Federated Municipal. However, Pnc International is 5.27 times more volatile than Federated Municipal High. It trades about 0.11 of its potential returns per unit of risk. Federated Municipal High is currently generating about 0.05 per unit of risk. If you would invest  1,433  in Pnc International Growth on December 21, 2024 and sell it today you would earn a total of  107.00  from holding Pnc International Growth or generate 7.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Pnc International Growth  vs.  Federated Municipal High

Pnc International Growth

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pnc International Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pnc International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Federated Municipal High

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Municipal High are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Federated Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pnc International and Federated Municipal

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

The idea behind Pnc International Growth and Federated Municipal High 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.