Correlation Between PNC Financial and Bank of the Philippine Is

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

Diversification Opportunities for PNC Financial and Bank of the Philippine Is

0.39

Correlation Coefficient

PNC Financial  Bank of the Philippine Is

Weak diversification

The 3 months correlation between PNC and Bank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the Philippine Is 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 Bank of the Philippine Is. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the Philippine Is has no effect on the direction of PNC Financial i.e., PNC Financial and Bank of the Philippine Is go up and down completely randomly.

Pair Corralation between PNC Financial and Bank of the Philippine Is

Considering the 90-day investment horizon PNC Financial Services is expected to generate 1.72 times more return on investment than Bank of the Philippine Is. However, PNC Financial is 1.72 times more volatile than Bank of the. It trades about -0.08 of its potential returns per unit of risk. Bank of the is currently generating about -0.44 per unit of risk. If you would invest  15,226  in PNC Financial Services on January 20, 2024 and sell it today you would lose (437.00) from holding PNC Financial Services or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

PNC Financial Services  vs.  Bank of the

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.

Bank of the Philippine Is

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Bank of the Philippine Is is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PNC Financial and Bank of the Philippine Is

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

The idea behind PNC Financial Services and Bank of the 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.