Correlation Between PNC Financial and MT Bank

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

Diversification Opportunities for PNC Financial and MT Bank

0.96

Correlation Coefficient

PNC Financial  MT Bank

Almost no diversification

The 3 months correlation between PNC and MTB is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of PNC Financial i.e., PNC Financial and MT Bank go up and down completely randomly.

Pair Corralation between PNC Financial and MT Bank

Considering the 90-day investment horizon PNC Financial Services is expected to under-perform the MT Bank. In addition to that, PNC Financial is 1.05 times more volatile than MT Bank. It trades about -0.1 of its total potential returns per unit of risk. MT Bank is currently generating about -0.04 per unit of volatility. If you would invest  18,968  in MT Bank on December 26, 2024 and sell it today you would lose (669.00) from holding MT Bank or give up 3.53% 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.  MT Bank

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.

MT Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days MT Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MT Bank 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 Financial and MT Bank

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

The idea behind PNC Financial Services and MT Bank 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.