Correlation Between PNC Financial and US Bancorp

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

Diversification Opportunities for PNC Financial and US Bancorp

0.97

Correlation Coefficient

PNC Financial  US Bancorp

Almost no diversification

The 3 months correlation between PNC and UB5 is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding The PNC Financial and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of PNC Financial i.e., PNC Financial and US Bancorp go up and down completely randomly.

Pair Corralation between PNC Financial and US Bancorp

Assuming the 90 days horizon The PNC Financial is expected to generate 1.03 times more return on investment than US Bancorp. However, PNC Financial is 1.03 times more volatile than US Bancorp. It trades about 0.3 of its potential returns per unit of risk. US Bancorp is currently generating about 0.28 per unit of risk. If you would invest  17,100  in The PNC Financial on September 5, 2024 and sell it today you would earn a total of  2,900  from holding The PNC Financial or generate 16.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

The PNC Financial  vs.  US Bancorp

PNC Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

US Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PNC Financial and US Bancorp

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

The idea behind The PNC Financial and US Bancorp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.