Correlation Between PNC Financial and JD Bancshares

Can any of the company-specific risk be diversified away by investing in both PNC Financial and JD Bancshares 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 JD Bancshares 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 JD Bancshares, you can compare the effects of market volatilities on PNC Financial and JD Bancshares 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 JD Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and JD Bancshares.

Diversification Opportunities for PNC Financial and JD Bancshares

0.83

Correlation Coefficient

PNC Financial  JD Bancshares

Very poor diversification

The 3 months correlation between PNC and JDVB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and JD Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Bancshares 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 JD Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Bancshares has no effect on the direction of PNC Financial i.e., PNC Financial and JD Bancshares go up and down completely randomly.

Pair Corralation between PNC Financial and JD Bancshares

Considering the 90-day investment horizon PNC Financial Services is expected to under-perform the JD Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, PNC Financial Services is 1.04 times less risky than JD Bancshares. The stock trades about -0.16 of its potential returns per unit of risk. The JD Bancshares is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,350  in JD Bancshares on September 20, 2024 and sell it today you would earn a total of  99.00  from holding JD Bancshares or generate 4.21% return on investment over 90 days.

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

PNC Financial Services  vs.  JD Bancshares

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 January 2025.

JD Bancshares

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Bancshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JD Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PNC Financial and JD Bancshares

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

The idea behind PNC Financial Services and JD Bancshares 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.