Correlation Between Gilead Sciences and PNC Financial

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

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

Diversification Opportunities for Gilead Sciences and PNC Financial

-0.47

Correlation Coefficient

Gilead Sciences  PNC Financial

Very good diversification

The 3 months correlation between Gilead and PNC is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences i.e., Gilead Sciences and PNC Financial go up and down completely randomly.

Pair Corralation between Gilead Sciences and PNC Financial

Given the investment horizon of 90 days Gilead Sciences is expected to under-perform the PNC Financial. But the stock apears to be less risky and, when comparing its historical volatility, Gilead Sciences is 1.31 times less risky than PNC Financial. The stock trades about -0.05 of its potential returns per unit of risk. The PNC Financial Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,458  in PNC Financial Services on February 7, 2024 and sell it today you would earn a total of  4,164  from holding PNC Financial Services or generate 36.34% return on investment over 90 days.

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

Gilead Sciences  vs.  PNC Financial Services

Gilead Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PNC Financial Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Gilead Sciences and PNC Financial

The main advantage of trading using opposite Gilead Sciences and PNC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences 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 Gilead Sciences 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.