Correlation Between PNC Financial and Targa Resources

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

By analyzing existing cross correlation between The PNC Financial and Targa Resources Corp, you can compare the effects of market volatilities on PNC Financial and Targa Resources 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 Targa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNC Financial and Targa Resources.

Diversification Opportunities for PNC Financial and Targa Resources

0.95

Correlation Coefficient

PNC Financial  Targa Resources

Almost no diversification

The 3 months correlation between PNC and Targa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The PNC Financial and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources Corp 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 The PNC Financial are associated (or correlated) with Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of PNC Financial i.e., PNC Financial and Targa Resources go up and down completely randomly.

Pair Corralation between PNC Financial and Targa Resources

Assuming the 90 days horizon PNC Financial is expected to generate 2.53 times less return on investment than Targa Resources. In addition to that, PNC Financial is 1.07 times more volatile than Targa Resources Corp. It trades about 0.05 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.12 per unit of volatility. If you would invest  6,564  in Targa Resources Corp on September 22, 2024 and sell it today you would earn a total of  10,316  from holding Targa Resources Corp or generate 157.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

The PNC Financial  vs.  Targa Resources Corp

PNC Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Targa Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PNC Financial and Targa Resources

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

The idea behind The PNC Financial and Targa Resources Corp 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.