Correlation Between PNC Financial and Main Street

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

Diversification Opportunities for PNC Financial and Main Street

0.12

Correlation Coefficient

PNC Financial  Main Street

Average diversification

The 3 months correlation between PNC and Main is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of PNC Financial i.e., PNC Financial and Main Street go up and down completely randomly.

Pair Corralation between PNC Financial and Main Street

Considering the 90-day investment horizon PNC Financial Services is expected to under-perform the Main Street. In addition to that, PNC Financial is 1.6 times more volatile than Main Street Financial. It trades about -0.1 of its total potential returns per unit of risk. Main Street Financial is currently generating about -0.04 per unit of volatility. If you would invest  1,426  in Main Street Financial on December 26, 2024 and sell it today you would lose (36.00) from holding Main Street Financial or give up 2.52% of portfolio value over 90 days.

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

PNC Financial Services  vs.  Main Street Financial

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 unsteady 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.

Main Street Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Street Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PNC Financial and Main Street

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

The idea behind PNC Financial Services and Main Street Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.