Correlation Between PNC Financial and BRIT AMER

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

Diversification Opportunities for PNC Financial and BRIT AMER

0.77

Correlation Coefficient

PNC Financial  BRIT AMER

Poor diversification

The 3 months correlation between PNC and BRIT is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of PNC Financial i.e., PNC Financial and BRIT AMER go up and down completely randomly.

Pair Corralation between PNC Financial and BRIT AMER

Assuming the 90 days trading horizon PNC Financial Services is expected to under-perform the BRIT AMER. In addition to that, PNC Financial is 1.36 times more volatile than BRIT AMER TOBACCO. It trades about -0.23 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.09 per unit of volatility. If you would invest  3,539  in BRIT AMER TOBACCO on October 8, 2024 and sell it today you would earn a total of  45.00  from holding BRIT AMER TOBACCO or generate 1.27% return on investment over 90 days.

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

PNC Financial Services  vs.  BRIT AMER TOBACCO

PNC Financial Services

Risk-Adjusted Performance

10 of 100

OK

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

BRIT AMER TOBACCO

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PNC Financial and BRIT AMER

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

The idea behind PNC Financial Services and BRIT AMER TOBACCO 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.