Correlation Between Banco Do and PNC Financial

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

By analyzing existing cross correlation between Banco do Brasil and PNC Financial Services, you can compare the effects of market volatilities on Banco Do 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 Banco Do with a short position of PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and PNC Financial.

Diversification Opportunities for Banco Do and PNC Financial

0.24

Correlation Coefficient

Banco Do  PNC Financial

Modest diversification

The 3 months correlation between Banco and PNC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil 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 Banco Do 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 Banco do Brasil 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 Banco Do i.e., Banco Do and PNC Financial go up and down completely randomly.

Pair Corralation between Banco Do and PNC Financial

Assuming the 90 days trading horizon Banco Do is expected to generate 18.03 times less return on investment than PNC Financial. But when comparing it to its historical volatility, Banco do Brasil is 1.45 times less risky than PNC Financial. It trades about 0.0 of its potential returns per unit of risk. PNC Financial Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14,522  in PNC Financial Services on January 20, 2024 and sell it today you would earn a total of  267.00  from holding PNC Financial Services or generate 1.84% return on investment over 90 days.

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

Banco do Brasil  vs.  PNC Financial Services

Banco do Brasil

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do may actually be approaching a critical reversion point that can send shares even higher in May 2024.

PNC Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PNC Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Banco Do and PNC Financial

The main advantage of trading using opposite Banco Do and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do 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 Banco do Brasil 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.