Correlation Between PNC Financial and Carpenter Technology

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

Diversification Opportunities for PNC Financial and Carpenter Technology

0.93

Correlation Coefficient

PNC Financial  Carpenter Technology

Almost no diversification

The 3 months correlation between PNC and Carpenter is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology 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 Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of PNC Financial i.e., PNC Financial and Carpenter Technology go up and down completely randomly.

Pair Corralation between PNC Financial and Carpenter Technology

Assuming the 90 days trading horizon PNC Financial is expected to generate 3.64 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, PNC Financial Services is 1.58 times less risky than Carpenter Technology. It trades about 0.05 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,900  in Carpenter Technology on October 11, 2024 and sell it today you would earn a total of  13,500  from holding Carpenter Technology or generate 346.15% return on investment over 90 days.

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

PNC Financial Services  vs.  Carpenter Technology

PNC Financial Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Carpenter Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PNC Financial and Carpenter Technology

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

The idea behind PNC Financial Services and Carpenter Technology 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.