Correlation Between Danske Bank and PNC Financial

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

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

Diversification Opportunities for Danske Bank and PNC Financial

0.55

Correlation Coefficient

Danske Bank  PNC Financial

Very weak diversification

The 3 months correlation between Danske and PNC is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Danske Bank AS 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 Danske Bank 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 Danske Bank AS 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 Danske Bank i.e., Danske Bank and PNC Financial go up and down completely randomly.

Pair Corralation between Danske Bank and PNC Financial

Assuming the 90 days horizon Danske Bank AS is expected to generate 0.93 times more return on investment than PNC Financial. However, Danske Bank AS is 1.07 times less risky than PNC Financial. It trades about 0.1 of its potential returns per unit of risk. PNC Financial Services is currently generating about 0.08 per unit of risk. If you would invest  1,027  in Danske Bank AS on January 26, 2024 and sell it today you would earn a total of  460.00  from holding Danske Bank AS or generate 44.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Danske Bank AS  vs.  PNC Financial Services

Danske Bank AS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Bank AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Danske Bank may actually be approaching a critical reversion point that can send shares even higher in May 2024.

PNC Financial Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Danske Bank and PNC Financial

The main advantage of trading using opposite Danske Bank and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danske Bank 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 Danske Bank AS 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.