Correlation Between PNC FINL and PNC Financial

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

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

Diversification Opportunities for PNC FINL and PNC Financial

0.98

Correlation Coefficient

PNC FINL  PNC Financial

Almost no diversification

The 3 months correlation between PNC and PNC is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PNC FINL SER and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial and PNC FINL 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 FINL SER are associated (or correlated) with PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of PNC FINL i.e., PNC FINL and PNC Financial go up and down completely randomly.

Pair Corralation between PNC FINL and PNC Financial

Assuming the 90 days trading horizon PNC FINL is expected to generate 1.04 times less return on investment than PNC Financial. But when comparing it to its historical volatility, PNC FINL SER is 1.06 times less risky than PNC Financial. It trades about 0.1 of its potential returns per unit of risk. The PNC Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  16,013  in The PNC Financial on October 22, 2024 and sell it today you would earn a total of  3,287  from holding The PNC Financial or generate 20.53% return on investment over 90 days.

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

PNC FINL SER  vs.  The PNC Financial

PNC FINL SER

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PNC FINL SER are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PNC FINL exhibited solid returns over the last few months and may actually be approaching a breakup point.

PNC Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PNC FINL and PNC Financial

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

The idea behind PNC FINL SER and The PNC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.