Correlation Between PNC Financial and Citizens Financial

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

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

Diversification Opportunities for PNC Financial and Citizens Financial

0.92

Correlation Coefficient

PNC Financial  Citizens Financial

Almost no diversification

The 3 months correlation between PNC and Citizens is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, and PNC 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 PNC Financial Services are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Group, has no effect on the direction of PNC Financial i.e., PNC Financial and Citizens Financial go up and down completely randomly.

Pair Corralation between PNC Financial and Citizens Financial

Considering the 90-day investment horizon PNC Financial Services is expected to under-perform the Citizens Financial. But the stock apears to be less risky and, when comparing its historical volatility, PNC Financial Services is 1.16 times less risky than Citizens Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Citizens Financial Group, is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,318  in Citizens Financial Group, on December 28, 2024 and sell it today you would lose (193.00) from holding Citizens Financial Group, or give up 4.47% of portfolio value over 90 days.

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

PNC Financial Services  vs.  Citizens Financial Group,

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Citizens Financial Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Financial Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PNC Financial and Citizens Financial

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

The idea behind PNC Financial Services and Citizens Financial Group, 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.