Correlation Between ST Bancorp and PNC Financial
Can any of the company-specific risk be diversified away by investing in both ST Bancorp 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 ST Bancorp and PNC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ST Bancorp and PNC Financial Services, you can compare the effects of market volatilities on ST Bancorp 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 ST Bancorp with a short position of PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ST Bancorp and PNC Financial.
Diversification Opportunities for ST Bancorp and PNC Financial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between STBA and PNC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services and ST Bancorp 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 ST Bancorp 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 Services has no effect on the direction of ST Bancorp i.e., ST Bancorp and PNC Financial go up and down completely randomly.
Pair Corralation between ST Bancorp and PNC Financial
Given the investment horizon of 90 days ST Bancorp is expected to generate 1.78 times less return on investment than PNC Financial. In addition to that, ST Bancorp is 1.23 times more volatile than PNC Financial Services. It trades about 0.07 of its total potential returns per unit of risk. PNC Financial Services is currently generating about 0.16 per unit of volatility. If you would invest 10,750 in PNC Financial Services on January 20, 2024 and sell it today you would earn a total of 4,039 from holding PNC Financial Services or generate 37.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ST Bancorp vs. PNC Financial Services
Performance |
| Timeline |
| ST Bancorp |
| PNC Financial Services |
ST Bancorp and PNC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ST Bancorp and PNC Financial
The main advantage of trading using opposite ST Bancorp and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ST Bancorp 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 ST Bancorp and PNC Financial Services 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.Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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